After the Monetary Policy Committee (MPC) meeting held on August 1, 2018, it was announced that the central bank’s repo rate will be increased by 25 basis points. Experts note that this was an unexpected surge, which in combination with the depreciating value of the rupee and a steady rise in inflation, may affect loan borrowers.
This change is likely to be a precursor to a rise in loan interest rates, especially your home loan. But there is no need to be alarmed. If you are likely to face a hike in your home loan interest rate, you can consider talking to your home loan provider or switching your loan to another lender.
Here is a look at how a home loan balance transfer can be of use to you in the case of an interest rate fluctuation.
You may be Able to Tackle a Potential Interest Rate Hike
If you decide to choose a new home loan lender, it is likely that the new lender is offering you a lowest home loan interest rate. This will automatically reduce your total interest payment. For instance, you take a home loan of Rs.20 lakh at 10% interest for a tenor of 20 years. Now, after repaying the loan for 5 years, you encounter an increase in the rate. In this case, if you opt for a home loan balance transfer with a new lender at 9% interest rate for the remaining tenor, your will save over Rs.2 lakh towards interest repayment. Also, your EMIs will be Rs. 20,286 and not Rs. 21,493, thereby offering you a savings of approximately Rs. 1,206 every month.
You can use the home loan EMI calculator in advance to determine the exact benefit you will enjoy owing to a home loan transfer.
You may Get Better Terms and Add-Ons
There is no harm in considering the home loan eligibility terms put forth by other lenders. If you find one offering you a better deal, you can take advantage of this and save. Confirm your savings with a home loan eligibility calculator. At the same time, do ensure that you check the added benefits that you will get with the new loan should you choose to shift lenders. This will help you save money and enjoy added privileges too.
In addition, while deciding these factors, calculate the tax exemptions basis your home loan balance transfer by making use of the income tax calculator. Understand that the interest repayment you make qualifies for tax exemption under Section 26 of the Income Tax Act. Now, if your interest obligations reduce considerably owing to the transfer, then your tax claim will also reduce proportionately. So, evaluate the benefit before signing on the dotted line.
It will Allow You a Chance to Shift to a Better Interest System
Unlike banks that strictly follow the MCLR system, NBFCs offer home loans on PLR rates. This means that they do not have to decide the interest rates on loans basis RBI guidelines. So, if you encounter a home loan interest rate hike, you can immediately try getting your loan refinanced via an NBFC.
Choose trusted lenders like Bajaj Finserv and opt for a home loan transfer. This refinancing will not only bring down the interest rate on your home loan, but it will also give you access to additional benefits such as Flexi Hybrid facility to help you organise your finances better, as well as a top-up loan to fund additional expenses, and nil foreclosure charges.
In case you are planning on taking a home loan now, consider the issue of a rate hike while reviewing the interest rates offered to you. Also check out pre-approved offers from trusted lenders on home loans, personal loans, business loans, and more. This helps you simplify the process of availing money and helps you save considerable time.