In a bid to woo more customers this festive season, leading banks have started slashing their interest rates on home and personal loans. As part of its festive deal offering, the country’s largest lender, the State Bank of India (SBI), is offering a discount of up to 0.25 per cent on home loans, with rates starting at 8.4 per cent. It is also offering a discount of 0.15 per cent on top-up loans and 0.3 per cent on loans against property. SBI has also waived off processing fees on home loans up to January 2023.
Bank of Maharashtra is offering home loans at a rate of interest of 8 per cent per annum, having cut its lending rates by 30-70 basis points (bps) earlier.
HDFC Bank is offering a standard rate of interest of 8.4 per cent to all its customers with a credit score of 750 and above. As part of its Diwali offer, Bajaj Housing Finance Limited has also slashed its home loan interest rate to 8.2 per cent per year for salaried individuals and professionals. Bajaj Finance will be offering this as a festive special offer from October 14 to November 30, at select locations.
Most of these banks and lenders are offering discounts for a specific period, after which they will start offering these loans on their usual lending rates. In this context, it’s important to understand how these special interest rates work.
Typically, the special offers are more on the lines of a reduction and waiver on processing fees, and the like. The reduction in interest is very low, usually in the range of 5 bps.
These offers vary with each lender, and the mechanism of reduction is specific to the lender. The terms and conditions of the offers are also different from the ones on regular loans.
Says Adhil Shetty, CEO and founder, BankBazaar.com, a financial services website: “A bank may require that your loan must be disbursed within the offer period for you to avail of the offer, while another lender may be satisfied with a sanction or in-principle sanction for the same. The special interest period may also be time-bound. For instance, a lender may offer you a loan with a special spread of 250 bps for a period of one year. Thereafter, the spread may go back to 255 bps. So, it is essential to read and understand the terms and conditions of the offer before you opt for it.”
Processing Fee And Other Charges
The most common cost associated with loans are application charges, processing charges, and prepayment penalties. In addition, some institutions may charge a commitment fee and, in case of home loans, a mortgage deed fee and legal fee.
Says V Swaminathan, executive chairman, Andromeda Loans and Aapnapaisa.com: “Processing fees and charges vary from bank to bank. Though financial institutions are giving good discounts on these charges, one can reach out directly to them and understand the benefits depending on their eligibility.”
Does Applying To Multiple Lenders Affect Your Credit Score?
Each time you apply for a loan, there is a hard query against your credit score, which gets recorded. If the number of queries is high, then this will have an impact on your credit score. So, it is best you check your eligibility against the lender’s criteria and apply only to one lender at a time.
“It is advisable to limit your hunt for home loans to few financial institutions. In fact, customers can seek expert advice before applying to multiple lenders online,” adds Shetty.
