Banks cut interest rates on home and personal loans as festive offers; What is the fine print?

In a bid to attract more customers in this festive season, major banks have started cutting their interest rates on home and personal loans. As part of its festive offer, the country’s largest lender, the State Bank of India (SBI), is offering a discount of up to 0.25% on home loans, with rates starting at 8.4%. It also offers a discount of 0.15% on top-up loans and 0.3% on home loans. SBI has also waived processing fees on home loans until January 2023.

The Bank of Maharashtra is offering home loans at an interest rate of 8% per annum, after cutting its lending rates by 30 to 70 basis points (bps) earlier.

HDFC Bank offers a standard interest rate of 8.4% to all its customers with a credit score of 750 and above. As part of its Diwali offer, Bajaj Housing Finance Limited has also reduced its interest rate on home loans to 8.2% per annum for salaried individuals and professionals. Bajaj Finance will be running this festive special from October 14 through November 30, at select locations.

Most of these banks and lenders offer discounts for a specific period, after which they will start offering these loans at their usual lending rates. In this context, it is important to understand how these special interest rates work.

Typically, special offers are more akin to a reduction and waiver of processing fees, etc. The reduction in interest is very small, generally around 5 basis points.

These offers vary with each lender, and the reduction mechanism is lender-specific. The terms and conditions of the offers are also different from those of regular loans.

Adhil Shetty, CEO and Founder of BankBazaar.com, a financial services website, says Adhil Shetty: “A bank may require your loan to be disbursed during the offer period for you to take advantage of the offer, while ‘another lender can be satisfied with a sanction or sanction in principle for the same thing. The special interest period may also be time-limited. For example, a lender may offer you a loan with a special spread of 250 basis points for a period of one year. Subsequently, the spread may rise to 255 bps. It is therefore essential to read and understand the terms and conditions of the offer before opting for it.

Processing fees and other fees

The most common costs associated with loans are application fees, processing fees and prepayment penalties. In addition, some institutions may charge commitment fees and, in the case of home loans, mortgage deed fees and legal fees.

According to V Swaminathan, Executive Chairman, Andromeda Loans and Aapnapaisa.com: “Processing fees and charges vary from bank to bank. Although financial institutions give good discounts on these fees, one can contact them directly and understand the benefits based on their eligibility.

Does Applying to Multiple Lenders Affect Your Credit Score?

Every time you apply for a loan, there is a difficult question about your credit rating, which is recorded. If the number of queries is high, it will impact your credit score. It is therefore best to check your eligibility against the lender’s criteria and only apply to one lender at a time.

“It is advisable to limit your search for home loans to a few financial institutions. In fact, customers can seek expert advice before applying to several online lenders,” adds Shetty.

Stephen V. Lee