State Bank of India cuts the processing fee till 31-March-2017

SBI Home Loans no processing fee for New Home Loans and for Balance Transfer till 31st March 2017.

State Bank of India to boost the volumes of Home Loan business for the last quarter of the 2017 financial year, SBI had launched a special campaign for Home Loans. Under the Home Loan campaign, Processing Fees on all Home Loan proposals(both takeover and new) sanctioned and partially/fully disbursed upto 31-Mar-2017 will be filly waived. The waiver of the processing fee will also be made available to proposals sourced upto 31st March 2017, provided the loans are partially/fully disbursed latest by 30th April 2017.

However , the processing Fee at the applicable rate will be recovered upfront in respect of all Pre-Approved Loans(PAL) and the same will be refunded to the customers by way of credit to the loan account in respect of all PAL proposals source during the campaign period upto 31-Mar-2017 and partly/fully disbursed on or before 30th April 2017

SBI Home Loan
SBI Home Loan

With the decrease in the MCLR for 1-year to 8.00% was itself a big boost to the Home Loan customers. But increase of the margins from 0.10% to 0.60% has added heavy burden to the home loan seekers. Most of the customers are still seeing the fall in the Home Loan rates from 9.10% to 8.60% which is like a mirage which is a short term profit and long term loss compare to the customer who had taken loan in Dec-2016.

Let me explain in detail,  Before I tell you, why customer who had taken home loan in Dec-2016 is better rate then present. I would like to explain, how the interest rate is set. Interest rate consist of 2 components.

 

Interest Rate = 1-Year MCLR  Rate + Margin Rate

Recent announcement was :  1-year MCLR Rate : 8.00 %

Margin Rate  was : 0.60 %

So effectively the Interest rate was set to  8.60 %  = 8.00 % + 0.60 %

What is 1-year MCLR ?

When we avail a loan with 1-year MCLR,  it’s 1-year Fixed loan. Which means any changes in  MCLR during that 12 months, your home loan will not be affected. For example if you availed home loan in Dec-2016 your interest rate change will be only in Dec-2017. So any change , decrease of MCLR or increase of MCLR, your home loan rate will not change during this 12 months. In Dec-2017 your home loan rate will get updated based on the 1-year MCLR during Dec-2017. Again next change will be next year Dec-2018 and this would continue till closure.

What is the Margin Rate ?

Margin Rate is what Banks take as the operational costs. It gets fixed when you have taken.  For example if you had availed home loan in Dec-2017 your home loan should have been 9.00% (8.90 + 0.10) your margin should be only 0.10 %. So your Interest rate would be 1-year MCLR + 0.10% for ever.

Now let’s compare your home loan with the new rates

Year 1-Year MCLR Customer who had taken in Dec-2016 time frame. Customer who had taken in Jan-2017 time frame.
Dec-2016 8.90 % 9.00 % (8.90+0.10)
Jan-2017 8.00 % 8.60 % (8.00+0.60)
Jan-2018 If 7.50 % in Dec & Jan 7.60 %(7.50 + 0.10) 8.30 %(7.70 +0.60)
Jan-2019 If 8.60 % in Dec & Jan 8.70% (8.60 + 0.20) 9.05% (8.60 + 0.45)
Sep-2019 If 9.25 % in Sep & Jan 9.35 %(9.25 + 0.10) 9.85%(9.25 + 0.60)

It would continue till the closure of the loan.  What we are seeing right now is, Short term profit and long term loss. People who convert to new rate without the long calculation they would start to pay every year 0.50% more than December rate.

1-year-MCLR had decreased drastically only due to demonetisation. Hopefully we need not stand in long Queues every year. Mostly its once in lifetime event.

Instead of banks making profits due to demonetisation drive they should have passed on the benefits to the end customers.

Hope to see cut in the Margins in coming days. Happy home Loans.

This complex calculations and to understand what is long term profit & short term loss versus short term profit with long term loss is better to be left to the professionals. http://loanyantra.com is best at this. We will wait for the margins to come down, then we would recommend the right change that would ensure you save the most on your home loans…

Happy Home Loaning…

Team

Loanyantra.com

Silver 90 Offer on Home Loan

“Silver 90 Offer “

            Apply Home Loan

                                                   Get Upto 1 Kg Silversilver_loanyantra-com

Avail Home Loan from Loanyantra.com and get Silver free.

T&C

  1. Offer from Loanyantra .com(Formally Renaud Financial Consultancy Services P Ltd, Regd Off @ Address.)
  2. Max Reward  is 1 Kg silver for 4 Cr home loan.  Multiplies with 2.5 Grams for each Lakh. Ex: 1 Crore : 250 Grms, 50 Lacs: 125 Grams..
  3. Home loan sanction and disbursement should be happen between Jan 1st 2017 and March 31st 2017
  4. Minimum  70% of the sanction amount must be disbursed before 31st March to avail offer. (Exempted for SBI and HDFC. There is no minimum disbursement required for these banks).
  5. Rewards will be handed over within 45  days of first disbursement.
  6. We reserve to determine all rights to finalize the eligibility of the offer to the user.
  7. Cash refund not allowed. We will issue silver only as mentioned in the offer.
  8. Without above offer also user can avail Home Loan.
  9. Subjected to Hyderabad Jurisdiction. 

Home Loan Glossary

Home Loan commonly used words while processing Home Loan.

  1. Home Loan – Amount borrowed to buy a home from a lending institution.
  2. PF – Processing Fees.
  3. Sanction – Approval of loan amount.
  4. Disbursal – Release of the sanctioned amount.
  5. PreApproval – Credit Approval of loan amount.
  6. PreEMI – Interest served before commencement of the EMI.
  7. EMI – Equated Monthly Installment.
  8. Amortization – Breakup of the principal and interest component in an EMI.
  9. PrePayment – Advance Principal repayment.
  10. BT – Balance Transfer or Refinance.
  11. Reimbursement – Loan Payment to be reimbursed in favour of the borrower.
  12. Balloon/Bullet payment – One shot principal repayment.
  13. Alternate Collateral –
  14. Additional Collateral – A full term secondary security taken along with the primary.
  15. Interim Collateral – A short duration additional security.
  16. Penalty or PPC – Pre Payment Charges, levied on advance principal repayment.
  17. ECS – Electronic Clearing System.
  18. IT Certificate – Income Tax Certificate for claiming tax benefits.
  19. SOA – Statement of Account.
  20. RTR – Repayment Track Record.
  21. LAP – Loan against Property.
  22. PLR – Prime Lending Rate.
  23. Spread or Margin – A constant on which a floating rate floats.
  24. Floating or ARM – Adjustable Rate Mortgage.
  25. Fixed Rate – Mortgage on fixed rate.
  26. MMC – Money Market Condition.
  27. Credit Report – An independent summary of an individuals credit history.
  28. RCU – Risk Control Unit.
  29. FI – Field Investigation.
  30. PD – Personal Discussion
  31. MCLR – Marginal Cost of Funds based Lending Rate

Why I don’t drive to office instead choose Ola Share and Uber Pool ?

These days most of my friends are travelling to office by Uber Pool or Ola Share rather than driving there own cars. One gets a luxury of not driving in the traffic, utilising the travel time and travelling at cheapest cost.

Why I choose Uber Pool and Ola Share over riding my own car is for a very different reason that you will surely fail to guess.

Firstly, I get a chance to spend 30 Minutes to 1-Hour with a most of the young hardworking entrepreneurs who have put there car in online car portals.  All of them by profession might be same but every one has a story, every one working hard on the road to generate more money. A journey that gives me a good way to start a day and end a day as an entrepreneur.

Secondly, revealing one of our secret sauce of lead generation is, Uber Pool and Ola Share are the cheapest source of lead generation for us. During the travel, I get to speak with at least 2 co-passengers about Loanyantra and give tips. Fortunately or Unfortunately they don’t have no other option but listen or be part of the discussion. Where else can you get 100% engagement of the customer for so long. Normally I keep it very interactive and tell about how we started it and how startups work. Once I introduce my self as one of the founder of the startup of Loanyantra, mostly my co-passengers get into the conversation. Till today everyone had dropped there mobile number or have taken my visiting card for the Home Loan correction.

Thirdly,as the famous Bangalore local quote, “If you throw in stone a street, it will either hit a Dog or a Software engineer. “. In both the cities Hyderabad & Bangalore lot of the young software engineers are using Uber Pool or Ola Share to travel. What would be better place it can be to interview few bright faces while on travel. Still not fortunate in hiring due to different skills. I forward few of the bright CV to my friends startups in T-Hub.

Last but not the least, when the world is moving towards digital the common interaction with the strange has reduced drastically. Here I get to meet new friends get to know what they are doing. Sometimes new insights. One occasion I got to meet one of the top bank Customer Relation Manager who is handling business loan portfolio of Rs 2000 Cr. His insights into the business and process was one of the best interaction I had in the travel. Hope to have more of such great interactions.

Loanyantra Uber Pool Ola Share
Why Loanyantra Co-Founder & CEO uses Uber Share & Ola Share instead of driving his own car.

Happy travelling and happy pooling and happy sharing… My journey continues… Hope to see you as one of the co-passenger soon… 🙂

 

Interest Rate Subsidy on Housing Loans

Interest Rate Subsidy on Home Loans – Know More

The year 2016 ended with the honorable Prime Minister Narendra Modi’s much awaited speech. The speech gave hopes to the poor, women and senior citizens. The housing policy schemes by the P.M., made easy for the poor to have a home of their own. The new policy of home loan interest rates subsidy to the needed, raised hopes in availing a home with the help of home loan. That too for really lower interest rates.

So, here are more details about Pradhan Mantri Awas Yojana and Credit Linked Subsidy Scheme.

Pradhan Mantri Awas Yojana (PMAY)  

  1. This scheme is valid in urban India (towns, cities, metros) for urban poor of income below 6,00,000/ year and age between 21 years to 58 years.
  2. Women play vital role in this scheme. A family comprising of husband, wife and unmarried children. Beneficiary should not own a pucca house either in their name or in the name of any member of their family in any part of India to receive central assistance under the Mission Meeting income criteria defined under the scheme
  3. Credit Linked Subsidy is available for housing loans availed for new construction and addition of rooms, kitchen, toilet etc., to existing dwelling as incremental housing.  The carpet area* of house should be constructed or enhanced under this scheme should be upto 30 sq.meters for EWS(Economically Weaker Section) category and upto 60 square meters for LIG(Lower Income Group) category.
  4. For identification as EWS/LIG beneficiary under the scheme, an individual loan applicant should submit self-attested certificate/affidavit as proof of income.

interest-rate-subsidy-_loanyantra-com

Credit Linked Subsidy Scheme(CLSS).

Any citizen of India can enroll for CLSS under the following conditions. The beneficiary, at his/her discretion, can build a house of larger area but interest subvention would be limited to first Rs. 6 lakh only.

This new policy of Credit Linked Subsidy Scheme (CLSS) is applicable for the Lower Income Group (LIG) of household income less than Rs.3,00,000 and the Economically Weaker Section (EWS) of household income less than Rs.6,00,000, not only for limited square feet.

So, now let us go into details of how the CLSS scheme works.

Any eligible applicant who choose a carpet area within  60 sq.m(645 sqft) of a flat/house then the applicant gets an home loan interest rate upto INR 12,00,000/- availed from the bank.

And if any eligible applicant is applying for 2 bhk of 975 sqft super built up area which has 644sq.ft of carpet area* (the real area you can use, source – 99acers.com), then the flat costs Rs. 40,00,000. Now, the applicant can enjoy interest rate subsidy on housing loan for Rs. 12,00,000.

The possible ROI as per Honorable PM speech is 5.5%. The non subsidized interest rate follows the existing market interest rate, which is currently 8.5%.

Example for CLSS Indetail. 

If any qualified applicant having gross salary of Rs.50,000/- per month and age is 30 years, the person is eligible for 37.88 lakh for maximum tenure of 28 years tenure and 30 lakh for 15 years tenure(know more and calculate your eligibility  http://loanyantra.com/Home-Loan-Calculator.aspx ).

So, the applicant, out of Rs. 40,00,000 has to pay down payment of 20% of the market value, which is Rs. 8,00,000. For the rest of Rs. 32,00,000/-, the applicant can go for a home loan. Under Pradhan Mantri Awas Yojana (PMAY)  Credit Linked subsidy scheme(CLSS) Rs. 12,00,000 will be subsidy interest and other Rs. 20,00,000 (Rs. 32 lakhs – Rs. 12 lakhs ) go as a non subsidy which has existing market rate of interest.

Carpet Area*: Area enclosed within the walls, the actual area to lay the carpet. This area does not include the thickness of the inner walls.

NOTE : Under the Mission, beneficiaries can take advantage under one component only.

Housing and Urban Development Corporation(HUDCO)  and National Housing Bank(NHB) have been identified as Central Nodal Agencies (CNAs) to channelize this subsidy to the lending institutions and for monitoring the progress of this component. Ministry may notify other institutions as CNA in future.

How to Enroll and Apply for Credit Linked Subsidized Scheme (CLSS).

Banks have a separate application for this kind of loan. Follow the official link to  download the application. http://www.tn.gov.in/exwel/forms/app5.pdf

If an applicant can qualify under Pradhan Mantri Awas Yojana (PMAY) for Credit Linked subsidy scheme(CLSS), the applicant can apply through http://loanyantra.com partnered banks and get assured lower interest till you close the loan.

 

 

 

Home Loan Interest Rates

What is Home Loan Interest Rate?

Home Loans have become the best medium to buy homes. Banks and NBFCs offer various home loan schemes and alluring interest rates that attract the home buyer. The key deciding factor for a customer to avail home loan from a particular financial institution is determined by the interest rate. The interest rate is charged on the principal loan amount. 

What determines interest rates on your Home Loan?

It is the bank that decides their lending rates. This depends on their cost of funds and NIM or Net Interest Margin which the banks need to earn to earn a profit and cover their operation cost.

An important point to note here is that home loans to salaried employees are offered at a lower rate as compared to those who are working in the unorganized sector; the prime reason for this is the stability of income of salaried employees.

The home loan interest rates calculation by the nationalized banks is presently based on MCLR or Marginal Cost of Lending Rate method. To this rate, the spread is added and then the final interest rate is mentioned to the customers or borrowers. And the NBFCs use Prime Lending Rate (PLR) calculation method.

Types of Home Loan Interest Rates

There are two kinds of home loan interest rates:

  • Fixed Interest Rate Loan-   This rate of interest remains fixed and the borrower has to pay a fixed EMI during the home loan tenure. The market fluctuations don’t impact the home loan rate. A major point of concern when it comes to fixed home loan rates is they are 1-2.5% higher than the floating rate of interest. If a borrower has fixed home loan then he/she doesn’t get the benefit if the home loan rates go down. Their EMI remains unaffected by it.
  • Floating Interest Rate Loan–  As the name indicates, floating rate loans have interest rates that change with the market condition. The are highly susceptible to market fluctuations. If the base rate changes, the floating rate also gets changed along with it. They are usually cheaper than the fixed rates but being highly influenced by the market condition they may vary as the RBI changes the rates.


Factors affecting home loan  
interest rate

  •    home-loan-interest-rates_loanyantra-comIncome
  •    Credit score
  •    Location of the property
  •    Loan amount
  •    Type of loan
  •    Loan tenure
  •    Type of interest rate
  •    Employment type
  •    On-going promo offers

All the banks and HFCs offer lucrative and competitive interest rate on the home loan, here is

The list of banks and HFCs and their interest rate.  

Banks and HFCs associated with Loanyantra Home Loan Interest Rate Range
SBI 8.50% – 9.10%
ICICI 8.65% – 10.10%
HDFC 8.65% – 9.25%
DHFL 9.00% – 10.00%
Indiabulls 8.65% – 12.25%
Standard Charted Bank 9.25% – 9.4%
Aditya Birla Housing Finance 8.65% -8.89%
IDBI 9.35%
Axis 9.15%-9.35%
CITI 8.8%- 9.55%
HSBC 8.85%-10.4%
Banks and HFCs not associated with Loanyantra Interest Rate
PNB Housing Finance 8.9% – 9.6%
LIC Housing Finance 8.5%
Kotak Bank 8.75%
Edelweiss 10.5%-10.9%
Reliance Capital 10%-11.75%
Bank of Baroda 9.6%
Indian Bank 9.65%
Dena Bank 9.6% – 9.85%
Bank of India 8.6% – 8.75%
Federal Bank 9.6%
Union Bank of India 8.8%
Allahabad Bank 8.7%-9.25%
Bank of India 8.65%-8.7%
Bank of Maharashtra 8.75% – 8.85%
Canara Bank 9.15%-9.70%

Discount on home loan interest rates by LOANYANTRA

Loanyantra is a one stop shop for all kind of home loan services. You process your loan with us and get 0.10% discount on the interest rate for one year. Also, manage your loan by the services provided by loanyantra. Get door-step service for the collection of documents and submitting them. Get updates about the process till disbursal. Our first priority is to understand our customer profile and then suggest them the best home loan which will match their requirement perfectly.  Get connected with us today to know more about home loans.

SBI Home Loan Interest Rates 2017

The most awaiting part of the demonitisation is here. Low interest rates for home loans. After the P.M., Narendra Modi’s speech on 31st December, 2016, banks now race with each other to reduce the home loan interest rates. Since there were no rate cuts by RBI Governor in the recent quarter review, there were less hopes for interest rate reduction.

After Modi mentioned in his speech about banks taking care in encouraging the poor, SBI had taken initiative in reducing the home loan interest rates. The new year started with the rate cut war.

SBI Home Loan Interest Rates

“THE MOST PREFERRED HOME LOAN PROVIDER” voted in AWAAZ Consumer Awards along with the MOST PREFERRED BANK AWARD in a survey conducted by TV 18 in association with AC Nielsen-ORG Marg in 21 cities across India.

sbi-home-loan_loanyantra-comSBI Home Loans come to you on the solid foundation of trust and transparency built in the tradition of SBI
  • Flexible repayment with tenure up to 30 years
  • Choose your loan amount and repayment schedule
  • Apply & get instant approval

Know more about the current SBI Home Loan interest rates

SBI Home Loan Interest Rates for women 8.60% – 8.65%
SBI Home Loan Interest Rates for Others 8.65% – 8.70%
SBI Maxgain Interest Rates above Rs. 20 lacs & upto Rs. 75 lakh (women) 8.75%
SBI Maxgain Interest Rates above Rs. 20 lacs & upto Rs. 75 lakh (others) 8.80%

sbi-home-loan-current-interest-rate_loanyantra-comExisting Home Loan borrowers can opt for switch over to current rate of interest on Home Loans by paying 0.50 % + applicable Service Tax of the outstandings

Get more benefits by availing your home loan through loanyantra.com. Get extra 0.10% discount on the interest rate for an year. The existing customers enjoy the benefit of managing the home loan and reducing the interest rate  on self interest.

Follow us and know more customised tips and save more on your home loan.

HDFC Home Loan New Interest Rates(January 2017)

Create a Space of your own with HDFC Home Loans. As expected, after SBI reduced the home loan interest rate, HDFC slashed its interest rates too.

hdfc-home-loan-interest-rate_loanyantra-comHave a look at the HDFC home loan new interest rates.

RPLR – 16.30%

Loan Slab Interest Rates (% p.a.) RPLR Minus Spread
For Women (upto 75 lakhs) 8.65 to 9.15 RPLR – (7.65 to 7.15)
For Women (above 75 lakhs) 8.70 to 9.20 RPLR – (7.60 to 7.10)
For Others (upto 75 lakhs) 8.70 to 9.20 RPLR – (7.60 to 7.10)
For Others (above 75 lakhs) 8.75 to 9.25 RPLR – (7.55 to 7.05)
Who Can Apply

You can apply individually or jointly for HDFC Home Loans. All proposed owners of the property will have to be co-applicants. However, all co-applicants need not be co-owners. Generally co-applicants are close family members.

Loan Term
  • The maximum period of repayment of a loan shall be up to 30 years for the Telescopic Repayment Option under the Adjustable Rate Home Loan. For all other Home Loan products, the maximum repayment period shall be up to 20 years.
  • The tenure of the loan is also dependent on the customer’s profile, age of customer at maturity of loan, age of property at loan maturity, depending upon the specific repayment scheme as may be opted and any other terms which may be applicable based on prevalent norms of HDFC.
hdfc-home-loan_loanyantra-comProcessing Fees

Up to 1.25% of the loan amount or ₹ 3,000 whichever is higher, plus applicable taxes.

Prepayment Charges

Prepayment charges at a rate of 2% plus Taxes and Statutory levies and charges, as may be applicable from time to time, of the amount being prepaid are payable.

Conversion Fees

The fee payable to avail the conversion shall be 0.50% plus applicable taxes of the principal outstanding plus the undisbursed loan amount or Rs.50,000 plus applicable taxes, whichever is lower.

Property Insurance

Property Insurance is compulsory and the customer shall pay the premium amounts directly to the insurance provider, promptly and regularly so as to keep the policy / policies alive at all times during the pendency of the loan.

HDFC Home Loans Under Pradhan Mantri Awaaz Yojana

Interest subsidy of 6.25% p.a. upto a loan amount of Rs. 6 lakh 15 years or hdfc-awaaz-yojana-_loanyantraactual term, whichever is lower. And Family Income should not exceed Rs. 6 lakh per annum.

 

The rate cut comes after a nudge from Prime Minister Narendra Modi in his year-end speech, where he said that massive inflow of deposits spurred by the demonetization of high-value banknotes has led to a significant reduction in the cost of funds.

“Over the past couple of months we have seen a drop in our marginal costs of funds and as always HDFC has ensured that benefit is passed on to its customers,” said Renu Sud Karnad, Managing Director, HDFC.

For further reduction in interest rate, logon to www.loanyantra.com and get 0.10% discount for one year. For those who already logged in, get free loan management till the closure. Enjoy the cash back benefits by referring your friends.

 

Credit Score and Home Loan

All that you should know about credit score

Buying your dream home is a dream come true and home loans have made it very easy for people to buy a home but, as easy it appears, home loan approval involves a series of steps and eligibility criteria which you need to fulfill to get the loan from the bank.

Banks and HFCs take into account a number of factors that define your eligibility for loan approval. One of the key parameters is CIBIL score or credit rating. Credit Score defines your credibility and how good you are in repaying your credit bills and EMIs. In other words, it describes how good is your financial health which in return increases the probability of your loan approval.

Detailed understanding of credit score –

CIBIL stands for Credit Information Bureau India Limited. This organization came into existence in August 2000 and looks after the credit ratings. It collects and maintains credit records of individuals as well as commercial entities. The credit records the borrowing payment relation. This includes all payments and borrowing related to loan or credit card.

On the basis of information collected, CIBIL assigns your credit score or CIBIL rating which banks reviews before approving the home loan. It’s a credit score of three digit numeric summary of your credit history. The credit score varies between 300-900.

Your credit report is available with CIBIL and can be availed by paying a nominal fee.

The credit report includes the following:

  • The history of the credit availed by you
  • Record of all the loans repaid by you and your credit card bill repayments
  • Late payments or penalties on past credit
  • Latest information about loan application and credit application by you
How Credit Score affects home loan eligibility?

Your credit score plays a key role in home loan approval. Once you submit the application for a home loan, bank checks your credit score and reviews your credit history.

Thus, if you have a good credit score, your home loan application will be processed faster, on the other hand, a poor credit history and score might get your application rejected.  Well, there is no universal score, every bank and HFC has different criteria and minimum credit score. But generally, a credit score above 750 is considered good by the majority of financial institutions. The score in the range of 350-750 is considered average or poor. Thus make sure that you check your credit score before applying for a loan.

credit-score-for-homeloan_loanyantraYour credit score reflects the following:

750-900    

  • Good score
  • You are likely to get loans at good interest rate
  • Both secured and unsecured home loans  can be easily availed by you

700-750    

  • Decent score
  • You are likely to get the loan from most of the banks but for unsecured loans, banks might conduct further review

550-700    

  • Low score reflecting delay in payment or irregular payment
  • Banks are usually dicey about approving loan
  • You might get your loan approved by some loan provider but at a higher collateral and low LTV
  • You might have to pay a higher interest rate

300-500

  • Poor score
  • Difficult to get loan especially from an established Bank or HFC
How is a Credit Score Calculated?

By now, we know that credit score plays a key role in home loan processing and approval.  You can check your credit rating on CIBIL’s official website by paying a nominal fee of around Rs. 470.

CIBIL’s Credit Score is calculated based on the following factors:

  • Repayment history of applicant: This accounts for 35% of the score. Hence make sure that you have cleared all your bills and loans. This helps in maintaining a good repayment history.
  • The credit balance:  This accounts for 30% of your credit score. This includes two factors, first how much credit has been sanctioned to you and second how much of that limit you have used. The credit utilization ratio is the balance which is outstanding on your loans and credit cards. If you have used most of the credit limit, you are considered a risky customer.
  • The duration of time for which you have used credit: This accounts for 15 % of the credit score. If you have taken for a long term and have been repaying the EMIS on time, it positively affects your credit score.
  • Application for new credit or availed new credit: This accounts for 10% of the score. Every time you make an application for credit, the lender checks your credit and if there are too many credit inquiries in line it can negatively impact your score.
  • Credit mix: This contributes 10% of the it. You should have a mixed bag of secured and unsecured loans, having a mix of both increases your credit score.
What if my credit score is low, how will I improve it?

There is a probability that your credit score might be low and bank rejects your application. However, this can be avoided if you work on the following steps:

  • Check your credit report regularly- Make sure you check your credit report regularly. It intimates you about any kind of defaults or delayed payments so that you can rectify it on time.
  • Timely repayment – The best way to keep your credit score right is repaying your credit on time. Timely and responsible payment affects your credit score positively.
  • Do not consistently apply if your credit has been previously rejected- In case your application has been rejected, give yourself some buffer time and then apply. Too many applications at a time can negatively impact your credit score.
  • credit-score-repair_loanyantra-comEnsure that you have a mixed bag of loans- While applying for loans do check that you have availed both secured and unsecured loans. Secured loans include car loans or home loans and unsecured loans include personal loan and your credit card as well.  Having both kinds of loans impacts your credit score positively.
  • Beware of joint application – In case you become a joint applicant with someone and that person defaults or have a poor credit score it might affect your credit score as well.

Always ensure that you are positive w.r.t Credit Score. Once you are on a safe side, it shows you are eligible for any kind of loan.

Know more tips about credit score and the impact on home loan by signing up with us.

Demonetisation effect on Home Loans

Demonetisation effect on Home Loans was seen from Jan-1st-2017, when SBI made a announcement of it’s forth-Night MCLR rate coming down to 8.00% from 8.90% and Home Loan rate from 9.00% to 8.50% itself shows demonetisation effect was positive on Home Loan rate. But, did you miss something, I am sure you have missed it.

MCLR had reduced from : 8.90% to 8.00%  :  reduced by 0.90%

Where as Home Loan rate has reduced by only 0.50% (9.00% – 8.50%) where did the remaining 0.40% go.

Who is taking that extra 0.40% , when its not passed on to the new home loan rate ?

What most of the banks have done is they have increased there margins from 0.10% to 0.60%.

Now let me go into more details about, was demonetisation a benefit or loss to new Home Loan Seekers and existing customers.

Demonetisation effect on Home Loans

Let me explain in detail,  Before I tell you, why customer who had taken home loan in Dec-2016 is better rate then post demonetisation. First I would recommend how MCLR is calculated  to understand why MCLR had reduced due to demonetisation and now I would like to explain, how the home interest rate is set by banks.

Interest rate consist of 2 components.

Interest Rate = 1-Year MCLR  Rate + Margin Rate

Recent announcement was :  1-year MCLR Rate : 8.00 %

Margin Rate  was : 0.60 %

So effectively the Interest rate was set to  8.60 %  = 8.00 % + 0.60 %

Prior demonetisation was 9.00% = 8.90%(1-year MCLR) + 0.10% (Margin Rate)

What is 1-year MCLR ?

When we avail a loan with 1-year MCLR,  it’s 1-year Fixed loan. Which means any changes in  MCLR during that 12 months, your home loan will not be affected. For example if you availed home loan in Dec-2016 your interest rate change will be only in Dec-2017. So any change , decrease of MCLR or increase of MCLR, your home loan rate will not change during this 12 months. In Dec-2017 your home loan rate will get updated based on the 1-year MCLR during Dec-2017. Again next change will be next year Dec-2018 and this would continue till closure.

What is the Margin Rate ?

Margin Rate is what Banks take as the operational costs. It gets fixed when you have taken.  For example if you had availed home loan in Dec-2017 your home loan should have been 9.00% (8.90 + 0.10) your margin should be only 0.10 %. So your Interest rate would be 1-year MCLR + 0.10% for ever.

Now let’s compare your home loan with the new rates

Year 1-Year MCLR Customer who had taken in Dec-2016 time frame. Customer who had taken in Jan-2017 time frame.
Dec-2016 8.90 % 9.00 % (8.90+0.10)
Jan-2017 8.00 % 8.60 % (8.00+0.60)
Jan-2018 If 7.50 % in Dec & Jan 7.60 %(7.50 + 0.10) 8.30 %(7.70 +0.60)
Jan-2019 If 8.60 % in Dec & Jan 8.70% (8.60 + 0.20) 9.05% (8.60 + 0.45)
Sep-2019 If 9.25 % in Sep & Jan 9.35 %(9.25 + 0.10) 9.85%(9.25 + 0.60)

It would continue till the closure of the loan.  What we are seeing right now is, Short term profit and long term loss. People who convert to new rate without the long calculation they would start to pay every year 0.50% more than December rate.

1-year-MCLR had decreased drastically only due to demonetisation. Hopefully we need not stand in long Queues every year. Mostly its once in lifetime event.

Instead of banks making profits due to demonetisation drive they should have passed on the benefits to the end customers.

Hope to see cut in the Margins in coming days. Happy home Loans.

This complex calculations and to understand what is long term profit & short term loss Vs short term profit with long term loss . Which one is better, to be left to the professionals. http://loanyantra.com is best at this. We will wait for the margins to come down, then we would recommend the right change that would ensure you save the most on your home loans…

Happy Home Loaning…

Team

Loanyantra.com