Lowest interest on
home loan: Get the biggest reward of your good credit history
Borrowers with good credit history and with higher CIBIL score will now get tangible reward in terms of lower interest rate on home loans from Bank of Baroda and save interest amount.
Lowest interest rate
for higher credit score: Bank of Baroda (BoB) is giving the cheapest
interest rate on home loans in the country, which is 8.35%, to its new home loan borrowers, who have
a credit score above 800. A new era of credit history based differential
pricing of home loan interest rate has begun. Earlier BoB decided to reduce its one year MCLR (Marginal Cost of funds based Lending Rate), a rate to
which interest rate of most of the loans are linked, from 9.05% by 70 basis
points to 8.35%.
A long overdue reward
for good credit history: A bank typically keeps a spread which it charges over the MCLR
whenever it offers a loan to its borrower. This spread in case a home loan from Bank of Baroda is 1% as a result a normal new home loan borrower will get a new home loan at annual
interest rate of 9.35%. This interest rate does not look attractive when you
compare the other lower interest rates offered by other bigger lenders SBI and HDFC as 8.6% and 8.65%
respectively to their women borrowers, and 8.65% and 8.70% respectively to
other borrowers. However BoB through its new offer, which is credit score based
home loan interest rate, has come out with market beating home loan interest
rate of 8.35%. The bank will offer this interest rate to those new home loan borrowers who have a
credit score of 800 or above. It was long overdue step in the Indian lending system to
start charging a differential interest rate based on credit history and reward
good repayment behavior with cheaper interest rate on loan.
Existing borrowers also get good benefit from the rate reduction: A majority part of repayment of a long term loan
goes paying interest payment therefore the cheaper the interest rate lowers the burden
for the borrower. Every percentage point of the interest rate matters
especially when it comes to a big and long term loan like home loan. If a
borrower with home loan of Rs 40 lakh for 20 years tenure sees his interest
rate fall from 10.05% to 9.35% he will save Rs 4.41 lakh of total interest
during his home loan repayment. This is what an existing home loan borrower,
who was on base rate system and paying 10.05% interest and now decides to
switch to MCLR system, will save through the MCLR rate reduction of 70 basis
points by Bank of Baroda.
New borrower with
high credit score will save a ton: However new home loan borrowers, who
have their credit score above 800, will end up having additional saving on
account of total interest payment during the tenure of the loan. As they would
get the home loan at 8.35%, in the above case when compared to existing home
loan borrowers, the new borrowers with higher credit score would do additional
saving of Rs 6.14 lakh on total interest rate payment. This means that due to
the interest rate reduction or the MCLR reduction a new home loan borrower with
higher credit score will now get a total interest saving benefit of Rs 10.55
lakh (Rs 4.41 lakh +Rs 6.14 lakh).
So it definitely makes sense for you to check your credit
score and if you have higher credit score you must avail this huge interest
rate saving benefit.
Can we transfer our existing home loan from one bank to another? Kindly suggest. Also do we need to bare heavy charges?
ReplyDeleteYes you can transfer your existing loan. To avail this low interest home loan from Bank of Baroda you would first need to check your CIBIL score. If your score is above 800 then getting your loan transferred to BoB would be a better option. There is no penalty on transfer of home loan if your existing home loan is on floating interest rate. In case you have a fixed interest rate home loan then you may need to pay some penalty but you would have net benefit even in this case because of huge drop in interest rate.
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