Get Ready to pay revised EMI on Home Loan

GET READY TO PAY REVISED <strong>EMI</strong>
ON YOUR HOME LOAN
If you are an existing home loan borrower or about <strong>to</strong> apply for a home
loan then this is the news which will make an impact on your decision. The
MCLR (Marginal cost of lending rate) has been increased by the leading banks
of India which will have a direct impact on the interest rate of all kinds of
secured loans i.e. home loan, two-wheeler loan or car loan. The interest rate is
going <strong>to</strong> be increased in coming days.
The largest lender of India, The State Bank of India has increased
its MCLR by up <strong>to</strong> 25 basis points (bps). In the same row, it comes HDFC,
ICICI and PNB <strong>to</strong>o. HDFC has increased its lending rate by 0.20 percentage
points whereas ICICI and PNB have increased its MCLR by 0.10 percentage
points and 0.15 percentage points respectively. The mentioned lenders are not
the only one <strong>to</strong> hike the interest rate, the other banks are also likely <strong>to</strong> revise
their MCLR in the days <strong>to</strong> come.

Whatever may be the reason behind increasing the MCLR, the existing
borrower and the home loan applicant are the ones who are going <strong>to</strong> suffer. At
the instance, it may look like a small hike in interest rate but in long term
(especially when it comes <strong>to</strong> the home loan), it will bring a huge difference in
the <strong>to</strong>tal cost of borrowing. Let’s understand the fact with an example.
Mr. Abhinav has a home loan of Rs 40 lakhs at the interest rate of 8.35% for 20
years. His <strong>EMI</strong> at present is Rs. ₹ 34,334. As the MCLR rate has been <strong>revised</strong>,
the interest rate has been increased by 25 basis points. So his new interest rate
has become 8.80%. With the <strong>revised</strong> interest rate his <strong>EMI</strong> has changed <strong>to</strong> ₹
35,476. There is a difference of Rs. 1142 in every month. In overall the
difference in the cost of borrowing will be Rs.2,74,084 which is a quite big
amount for any middle-class Indian.
In such scenarios when the interest rates have been increased by the lenders,
there is nothing much which a borrower can do. The only thing which one can
do is <strong>to</strong> opt for a fixed interest rate. A fixed interest rate is generally higher than
a floating interest rate but you will be at a stagnant rate of interest until the end
of the tenure.
Whether it may an inflation or a raised deposit rates, a raise in interest rate is hit
in the wallets of the public. Indian borrowers are not new <strong>to</strong> such turbulence of
the market which hits them directly or indirectly.