Festivities call for celebrations, and Diwali is the biggest celebration time in our country. The largest public sector bank of the country, State Bank of India is offering the lowest interest rate offer on Home Loan this festival season in 2019. Besides, the bank has also launched an exclusive Festival Loan to add more spark and celebration to your festivities.
As per the recent announcement from RBI, with effect from 1st October 2019, it has been made mandatory for all banks to link floating interest rates to external benchmarks. RBI has provided four benchmarks and has asked the banks to select any of these benchmarks to decide the final interest rate:
Following the cue, State Bank of India announced Repo-Rate Lending Rate linked SBI Home Loan. The product is not only more affordable than the previous Home Loan but also has more flexible terms for you.
Let’s review this new housing loan product by SBI and find out what all benefits do it entail for you.
Under the previous MCLR regime, the rate cuts announced by RBI were not being passed on to the borrowers as frequently as the change in the benchmark rate. There was a significant gap in the transfer of benefits to the customers. With change in RBI guidelines, things are set to undergo a massive transformation.
SBI presently charges a spread of 2.65% over the base rate. As the repo rate presently is 5.40%, this implies that the new SBI Home Loan Interest Rate would be between 8.05%to 8.20% per annum, depending on your credit score and risk profile. Whereas, the Home Loan Interest Rates under the MCLR regime effectively started from 8.65% (for Home Loan of Rs. 75 Lakhs), so the interest rates are expected to fall substantially in the coming days.
Let’s list out the benefits of availing newly launched SBI Home Loan this festival season:
Under the external benchmark linked interest rates regime, you can expect the benefits of repo rate cuts announced by RBI to pass on to you more quickly. Earlier, banks were hesitant to pass on the benefits of rate cuts, and there was too much opacity on the effective rates as MCLR was an internal benchmark. But now, you can expect changes in your SBI Home Loan EMIs as soon as the apex bank announces the changes.
Under the new repo-rate linked Home Loans, your EMIs will change at least once every three months. Though, it is possible that banks can announce changes more than once during this period. For, RBI has not put a cap on the number of changes that can be made during a three month period. So, you can expect changes in your SBI Home Loan EMIs frequently.
Please note that there is a flip side also. If the RBI announces an increase in the Repo Rate, then your EMIs will increase instantaneously.
There is a capping on the period during which banks can not change the spread they charge against loans. Under this new regime also, banks can not change the spread they charge on loans for three years. The change can be done only if the bank has witnessed an increase in operational costs or other liquidity related factors. So, you can expect that your EMIs will not change due to any changes in the spread anytime soon.
RBI has allowed banks to charge a higher interest rate under the new regime based on the credit profile of the customer. So, if you have a good credit score (750+), you will get a lower interest rate as compared to someone with a lesser credit score. Moreover, salaried employees will get lower interest rates as compared to self-employed individuals.
As the new system has already kicked in, you will have the option to transfer your MCLR based Home Loan to RLLR based Home Loan soon. Otherwise, you can always opt to transfer the Home Loan to a new lender, offering better interest rates. With the government looking to give a boost to the economy, any increase in Repo-Rate looks improbable at the moment. So, by opting for RLLR based Home Loan Interest Rate, you can make substantial savings on your interest cost and enjoy the benefits of lower EMIs.
Besides, the banking major has also introduced an SBI Festival Loan 2019 for the customers.
Whether you are planning to bring home new furniture, spruce up interiors, or have a family get-together this Diwali, you can apply for the SBI Festival Loan for up to Rs 50000 and instantly meet all types of festival-related expenses.
Both salaried as well as self-employed individuals are eligible for the product. The eligibility requirement is much flexible as the cap for net monthly income is put merely at Rs.3000. You can also apply for a joint loan with your spouse.
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