By Chaitali Dutta
My home loan is based on MCLR and the rates have been going up for the past two years. I have paid EMI for eight years. Should I shift the loan to a repo-based rate?
—Bhaskar Mishra
A loan with the interest rate linked to the repo is better in terms of transparency and quick reflection of changes in the loan rate with the movement in the repo rate. It is also expected that the interest rates in India have peaked and with the control of the inflation rate, there will be a reduction in rates in another two quarters. Keeping this expected scenario in mind, it would be better to switch to a repo-linked loan. Talk to your existing loan provider for a switch before looking for another bank/ NBFC for the same.
Should I take a personal loan or a loan against property of `5 lakh to invest in business. Can I repay after six to eight months?
—Jitendra Kumar
The personal loan will be at a higher interest rate than a LAP. However, the repayment of the LAP within a year may be restricted by the bank/NBFC. Find out the early payment rules first.
I had purchased a property in Bangalore 10 years ago and am paying the EMI. Last year, I relocated to Mumbai. I want to sell the flat in Bangalore and buy it in Mumbai. Do I have to first close the loan and then start the sale process?
—Ashutosh Sharma
In the sale of a property where a home loan repayment is going on, the loan details must be shared with the purchaser. The purchaser pays the loan amount first to extinguish the loan and then the balance amount is paid into your bank account. The Agreement to Sell has to incorporate all these details.
What is a home loan overdraft scheme and can I save some interest amount through it?
—Jignesh Pawar
Typically the home loan is a term loan that has a constant EMI throughout the loan tenure. In case of a home loan that is sanctioned as an overdraft facility, you may park funds available for any period of time ranging from a few days to a few years, in the loan account. This parking of temporary funds reduces your interest payment to the bank. Hence with each EMI, a higher amount of principal gets repaid. A loan availed as an overdraft facility, may get over before its term. The early closure will depend on the quantum of funds parked in the account and the period for which the additional funds were available.
The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance.com).
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