Loangurus

RBI has made life easier if you want to switch / refinance loans ..

Almost all loans are on floating rate. When rates go up, banks increase your tenure. So you pay the same EMI but for longer. Similarly when rate drops, your tenure is reduced. But it takes the bank 6-12 months to reset your loan rate lower. Also the transition of rate may not be full i.e. Market rates would have gone down by 0.5% but your home loan rate will come down by only 0.2% vs some other bank where it went down by 0.4%. Which is why there is always someone else in the market that can refinance your loan at a lower rate. So your loan moves to the new bank at a lower rate and your new bank pays off the outstanding at the old bank i.e. Refinancing

Try this with you bank if you see lower rates elsewhere. Tell the bank I am getting a lower rate somewhere else and hence you want to switch. The bank will reset it to a lower rate most of the times or you switch to the new bank and save interest. But here the banks would play their cards to make it difficult for you to switch but RBI is doing a great job to solve it.

(1) Banks used to charge you a pre payment penalty. RBI abolished this.

(2) Not release your documents / charge on the documents of property or other collateral which the new bank will need. This is also done away with in the new circular that came yesterday. Banks have a maximum of 30 days to returns the documents or else a penalty of Rs. 5,000 per day post that.

(3) You can now also apply for fixed rate loans which earlier was not easy to get.

So ya, go and negotiate your loan rates with the bank and bring it down or get it refinanced!

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