Financial institutions are compelled to increase their interest rate when RBI increase its lending rate (also known as repo rate). Such hikes in repo rates affect customers directly as they have to pay a higher EMI now. This is why it is essential to choose a lender who is linked to the MCLR (Marginal Cost Lending Rate) as MCLR offers greater transparency and has a better mechanism to fix rates.
How can prospective borrowers handle the hike in the interest rate?
A home loan EMI calculator comes in very handy in such situation as it enables the customer to calculate the Home Loan EMI of every lender. Prospective borrowers can use this calculator to compare the interest rates before deciding which bank/NBFC they want to finalize.
How can existing borrowers handle a hike in the interest rate?
Existing borrowers need not worry as there is a facility to allow customers to transfer the current loan amount balance to another lender. So existing customers can check the interest rate of their lender and compare it to other lenders using an EMI calculator, after which they can transfer the balance to the lender who offers a lower interest rate. Customers can also use this facility if their current lender is linked to the base rate and they want to switch to a lender who is linked to MCLR.
Thus, prospective as well as existing customers can handle the fluctuation in the interest rate with the use of an EMI calculator. Customers should ensure that the lender they choose is linked to MCLR and that the interest rate of every lender is compared thoroughly.
