When a person takes home loan from one bank and checks with his friends, relatives etc. who took loan of same amount from another bank, their interest rates vary drastically. This is because some banks are giving loans at a cheaper rates for new customers and charging higher rates for old customers. They follow this practice to increase their customer base. Some banks charge way higher interest rates than the normal rates set by RBI.
This practice has to be ended and in order to solve this issue RBI came up with a scheme called MCLR which stands for Marginal Cost based Lending Rate. This was introduced to stop the base rate system which banks are following currently. Through MCLR the customers will be required to pay a less interest rate compared to what they are paying now. Even when the customer has taken a loan before 1 year he can change to MCLR scheme.
For example if a person has taken a loan of Rs. 50 lakh and he is paying an interest at a rate of 9.5% at an EMI of Rs.52, 200. Through MCLR this rate comes down to 8.5% and this brings the EMI down to Rs.49, 250. This saves around Rs.2950 per month and in a year it saves up to Rs.35400. If the loan tenure is of 7 years then the total amount saved will be around Rs.2.48 lakhs. This is a huge amount to be ignored.
Let us look at the interest rates with previous EMI and MCLR rates given by RBI to various banks in our country.
Example: Loan amount – up to 20 lakhs and loan tenure of 15 – 20 years.
|Bank Name||Floating Interest rate (%)||Per lac EMI||MCLR rate (%)|
|SBI||8.35 – 8.50||Rs. 858 – 868||8.0|
|ICICI||8.35 – 8.80||Rs. 858 – 886||8.2|
|HDFC||8.35 – 8.55||Rs. 858 – 871||8.15|
|LIC HOUSING||8.35 – 8.70||Rs. 858 – 881||8.15|
|BANK OF BARODA||8.35 – 8.55||Rs. 858 – 871||8.35|
|DHFL||8.60 – 8.70||Rs. 874 – 881||–|
|IDBI||8.35 – 8.40||Rs. 858 – 861||8.80|
|UNION BANK||8.75 – 8.80||Rs. 884 – 887||8.50|
|INDIAN BANK||8.60||Rs. 874||8.50|
If we look at the MCLR rates given by RBI, even though they show a very small change, but the overall amount that will be saved will be in Lakhs.
To get the best possible loans for your new house, it’s advisable to look at the MCLR rates given by banks and also look at the tenure of that loan. Always going for a cheaper rate will not be a better option as the bank services should also be considered. A good reputed bank with a reasonable MCLR rate will be the best option.