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Friday, 1 January 2016

Loan Basics

The single most important factor in any loan is rate of interest (Roi), and  is  also the most ignored by a borrower. A small change in interest rate will substantially impact on overall cost of the loan i.e. repayment of combined interest and principal part of loan. It is always advisable to keep monitoring Roi, not seldom but rather frequent say on quarterly basis. Banks offer loans linked to their base rate or benchmark lending rate and are subject to change in periodic cycles whenever there are announcements by Reserve bank based on monetary policy or competitor banks.

If borrowers does not keep track of applicable Roi on his loan, he may end paying higher Roi than competitive rates available in market. A smart borrower will evaluate and analyse cost benefit analysis by switching over the loan to any other bank offering lower interest rates.

So here are simple tips that can help you decide whether to switch over  your loan or not-

For example a borrower has a loan of Rs 50 lacs at interest rate of 10.50% with Bank ‘A’. The monthly EMI in his case will be Rs 49,919/-  for 20 years tenure. Bank ‘B’ offering lower interest rate of 9.50% for  tenure of 20 years will result into EMI of Rs 46,607/- for similar 50 lacs loan amount.A staggering saving of Rs 3312/- per month will result into an approximate saving of Rs 7.94 lacs with 20 years tenure, which is 15.90% of 50 lacs. Even after paying processing fees and other charges that may incur up to maximum of Rs 25,000/- , it makes sense to switch your loan to other bank.

So be a smart borrower , make your decision today to compare your loan against current lower competitive rates offered by banks in market and switch your loan.

Head over to our website Click Easy Loans for more details and enquiries.