By Chaitali Dutta
I had taken a home loan 10 years ago on MCLR. Can I shift the loan to EBLR (repo rate), and will it be cheaper?
—Akashdeep Singh
Yes, absolutely. Moving to a repo rate-linked loan is better from a long-term perspective. Additionally, we are looking at a softer interest rate regime going forward. You can expect quicker and more transparent transmission of interest rate movements, as and when announced by the RBI.
If I take a car loan for five years, will the rate remain fixed for the entire tenure?
—E S Sharma
Most of the loans would be at a floating rate. We are also expecting further reduction of rates in the mid-term. In such a soft interest rate regime, a floating rate car loan will be beneficial.
How many shares do I have to pledge to take a loan of Rs 5 lakh for three years to repay?
—Tarun Kumar
Typically, 50% of the valuation would be considered as a loan if taken against securities. The reason for the smaller percentage as loan eligibility is that the underlying security is volatile, hence, the market value could contract during the period of the loan, reducing the security for the bank.
I repaid my home loan about five years ago. Now I want to do some home renovation. Will I be eligible to take a home renovation loan at a lower cost as compared with a loan against property?
—Lokesh Rajkumar
Yes, the home renovation loan, where you will mortgage the entire property, will be at a lower interest rate. However, here the bank will ensure the end-use of the funds. Hence, proof of the quotation for the work to be done and later the proof of the house renovation done, has to be provided to the bank.
We are two brothers and stay in a house which is in my mother’s name. The will of my father says that after her, the property will be divided between the two of us. Can we take a joint loan to redevelop the house?
—Rajpal Singh
The redevelopment may be done independently only after the property is transferred to you. If the property continues to be in your mother’s name, then a home-renovation loan can be availed in the joint names of you, your brother, and your mother. The repayment is to be a joint responsibility of the earning members. Here, the loan-providing bank will hold the mortgage of the property.
The writer is founder, AZUKE Personal Finance Advisory.