Monday, December 15, 2008

How to reduce the Home loan rates ?

One of my client Mr Arvin, who has taken a home loan. He was very upset and angry at the banks. He has taken a Home loan couple of years back when interest rate was around 8% since his was a floating loan, every time benchmark interest rates went up, his interest rate also went and they went such high in early 2008 that it almost reached 12%.

The banks are so smart that as soon the benchmark is declared they hike there rates with immediate effect. Now the reverse has started to happen.
The interest rates have started to come down and for banks to follow them it takes a long time. now the old customer is stuck up. and the existing ones will not get the benefit of lower rates.

The options existing customer has are as follows
1) Move the loan from the current bank to another bank but this will incur him a PREPAYMENT penalty
2) Renegotiate with the existing bank to reduce the rates but this is tough cookie to crack but still most practicable.
3) Pre - pay as much as possible in order to reduce the impact of EMI.
4) I think there has to be some ombudsman like mechanism were in customer can complaint about the banks not reducing the interest rates when benchmark indices are reduced

Kindly do share your experience if you have faced similar problems.

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