Two banks, Bank of Baroda and Bank of Maharashtra, have recently reduced their interest rates for home loans amid rising interest rates and high inflation. This would only be accessible for a brief period of time to qualified clients. But, if you were hoping to purchase your ideal home but were concerned about the high loan rates, now might be your best chance to work with these banks to secure a good deal. Consider moving your home loan to a bank that offers a lower interest rate if you are an existing client with a higher interest rate on your loan. You can lower the total cost of your loan and save money on interest payments by doing this.
However, it is crucial to thoroughly consider the terms and conditions of both your current loan and any prospective new loan before making a decision. Take into account elements including the loan’s term, processing fees, and prepayment penalties. The following are some benefits and drawbacks of moving your house loan to a bank that is providing a reduced interest rate:
Advantages
Lower interest rates: The biggest advantage of shifting your home loan to a bank that is offering a lower interest rate is that you can save money on interest payments. This can significantly reduce the overall cost of your loan.
EMI reduction: When you shift your home loan to a bank that is offering a lower interest rate, your EMI (equated monthly instalment) will also get reduced. This means that you’ll have more money available each month to meet other expenses.
Improved credit score: By shifting your home loan to a bank that is offering a lower interest rate, you can potentially improve your credit score. This is because a lower interest rate means lower EMIs, which means you are less likely to default on your loan payments.
Adhil Shetty, CEO, Bankbazaar.com, says, “The primary benefit of a home loan balance transfer is that you can avail of a lower interest rate on your loan. It can significantly reduce your interest payments and save you money in the long run. A lower interest rate can also result in reduced EMIs. This means that you’ll have more money available each month to meet other expenses. You must check all pros and cons and negotiate better loan terms, such as longer loan tenure, before the final call.”
Disadvantages:
Processing fees: When you shift your home loan to a new bank, you may have to pay processing fees. This can be a significant expense and may offset some of the savings you make by shifting your loan.
Prepayment charges: Some banks charge prepayment penalties if you prepay your loan before the end of the tenure. This means that if you want to shift your loan to a new bank, you may have to pay prepayment charges to your existing bank. However, it may vary from bank to bank. There are no prepayment charges for shifting your floating rate home loan.
Impact on credit score: Every time you apply for a loan, it gets recorded in your credit report, and multiple applications in a short span of time can negatively impact your credit score.
It’s important to carefully weigh all the pros and cons before deciding to shift your home loan. Consult a financial advisor or speak with the representatives of the concerned bank to make an informed decision.
