Home loans get more expensive

LOAN RATE HIKE

With top banks such as State Bank of India (SBI) and ICICI Bank Ltd increasing their marginal cost of funds based lending rate (MCLR) by 15-20 basis points (bps), home loans, auto loans and personal loans linked to MCLR are now more expensive. SBI, the country’s largest lender based on assets, increased its one-year MCLR to 8.45% from 8.25%. ICICI Bank also increased its one-year MCLR to 8.55% from 8.40%. Most banks link their home loan to one-year MCLR. As major banks increased interest rate, other banks and housing finance companies are likely to follow suit.

THE SPREAD

In the higher interest rate environment, remember to factor in other costs that are attached to your home loans. Firstly, most home loans come with a spread on MCLR in case of floating rate loans. For instance, SBI has a spread of 20-180 bps depending on the loan amount, income category and type of loan. If you are a salaried woman, and your floating rate home loan amount is up to ₹30 lakh, your interest rate will be marked on oneyear MCLR and 20 bps spread. Effectively, your home loan rate will be 8.65%. Hence, you need to also factor in the home loan spread above MCLR.

FACTOR IN CHARGES WHY USE IT?

Initially card companies used to provide debit and credit card with magnetic stripe. A magnetic stripe card stores all your information such as the 16-digit credit or debit card number, date

of birth, name and expiry date.

However, when fraudsters started cloning and misusing magnetic stripe data, banks looked at providing EMV cards which is more efficient in protecting

you against card fraud. You also need to factor in other costs such as processing fee, administrative charges, legal fee, franking fee and application fee. Usually all banks ask you to pay these charges. Compare all the charges with different banks and housing finance companies. If you have a good credit score, you can negotiate these charges and your home loan interest rate. Credit score is an indicator of your repayment capacity which banks use to analyse your loan profile. Remember you can’t get loans below MCLR. However, you can negotiate the spread on it.

HOW IS IT USEFUL?

According to cyber experts, it is difficult to steal data from the chip of EMV cards as it is encrypted and connected to a server.

It is built on a technology known

as cryptogram.