Your Home Loan EMI, Car Loan EMI Can Increase From April Due To This Reason
As per the newest reports coming in, the home loan rates of the State bank of India have increased by 25 basis points and will be effective from April 1.
Additionally, other banks are expected to follow in SBI’s footsteps soon enough.
How will this affect our car and home loans? What should the borrowers do now? Read on to find out!
SBI Increases Home Loan Rates From April 1
The State Bank of India has now withdrawn its ‘limited period offer’ and original interest rates have been replaced by the lender.
This means that the SBI’s home loan rates have increased by 25 basis points.
The new SBI home loan rates will start from 6.95% from April 1; they were at 6.7% till March 31, 2021.
There also is the possibility that other lenders will soon implement similar tactics and implement a rise in their lending rates for floating-rate loans.
What Should You Choose: Increased Tenure Or Extra EMI?
If you have taken a home or car loan recently, one possibility is that banks will automatically increase the tenure of the loan instead of increasing the EMI.
Here’s an example: if the home loan rates increase by 50 base points, then, for a home loan of Rs 50 lakh (outstanding amount) with a tenure of 20 years, you will be required to pay 23 EMIs more.
In case you don’t want to increase the tenure of the loan, you will be required to pay an extra Rs 1,515 per month towards your home loan EMI.
However, the borrowers who are nearing their retirement age will not be eligible for increasing the loan tenure. They will have to pay the higher EMIs to the bank.
As per experts, if you get the option to increase the tenor of your loan, you should not opt for that as it will result in an increase in your total interest payout.
In case you want to switch your home loan because of an increase in the interest rate, you can search for banks that are offering lower rates than those offered by your current bank. If the interest rate differential is more than 50 basis points and the remaining tenor is more than 15 years, you can consider switching your loan to enjoy lower interest rates offered by other banks.