In 2016, RBI announced that financial institutions must use the MCLR to set their lending rates for their advances.
To make loans even more affordable, few financial institutions have made repo-linked lending rates available for borrowers. This regime for interest rates was announced after RBI’s monetary policy committee announced a cut in repo rate by 35 bps in August.
There are several ways through which borrowers will benefit by choosing a repo-linked home loan. The following are a few instances of it.
Benefits of opting for repo linked lending rate
Even though this particular system has been made available by only a few financial institutions, borrowers opting for it can enjoy the following benefits –
- You can compare easily between available loan options
Previously, to avail the best home loan interest rate borrowers had to compare between benchmark rates of financial institutions and past MCLR rates to know if the lender offered the maximum benefits of the advance.
With the new system, individuals can only choose one benchmark and compare the lenders offering the benchmark to maximize the benefits of the credits.
- Transmission of the interest rates under the policy is faster
Under this regime, interest rate hikes or cuts made by the RBI are automatically directed to the borrowers. Individuals no longer have to wait for their financial institutions to respond to the interest rate changes made by the RBI.
- The system offers more transparency to borrowers
Few lenders often chose to pass on only a part of a rate cut of policies to borrowers. However, with the new system, the transmission of policy rates is much more complete. Individuals no longer have to pay higher interest rates on their home loans even after the RBI has reduced the repo rate.
Now, even though the repo-linked home loan offers the above benefits to borrowers, it is still unclear whether it is the ideal option for advances or not. Since only a small number of financial institutions have integrated this regime into their system, it can be hard for borrowers to find a policy that caters to all of their requirements.
Additionally, under the repo-linked lending system, financial institutions are allowed to levy interest rates at a margin higher than RBI’s rates. Along with this, lenders can also charge an additional 0.40%-0.55% on interest rates depending on the individual’s creditworthiness.
Applicants also have to fulfill some eligibility criteria for a home loan to avail of the repo-linked interest rates.
If you do not satisfy the criteria, you can alternatively choose to avail the advance from lenders offering competitive interest rates. You can easily get better home loan interest rates if you put in enough research before you apply for the advance, Read also:- Free Webtoon Coins.
Benefits of availing housing loans
There are several benefits that you can enjoy when you avail of this advance. Some of them are-
- High loan amount value of up to Rs. 5 Crore.
- Flexible tenure up to 20 years.
- Easy approval with minimal documentation.
- A top-up loan amount to cover the unanticipated expenses that might arise. The top-up loan does not have end-use restrictions and can be utilized to cover any personal expenses.
- The facility of easy balance transfer that can be utilized to transfer your outstanding loan amount to a lender offering more affordable interest rates. However, before planning for loan balance transfer know the MCLR rate.
Thus, until more lenders start following the repo-linked lending system, you can avail housing loans at affordable interest rates from institutions following the MCLR-based lending rates as well. Make sure to compare the different interest rates to avail the ones best suited for your requirements.
