This rule is applicable to existing home loans. However, this rule is applicable only to floating rate of interest loans. The pre-payment penalty on loans taken on fixed-rate continues to hold.
By Chaitali Dutta
I had taken a loan from an NBFC in 2006 where there was a 2% penalty clause on pre-payment. Now that the rule has changed after 2014, will it still charge me the penalty if I pre-pay?
– K Radhakrishnan
The prepayment penalty/ foreclosure charges was discontinued in 2012 as per RBI circular RBI/2011-12/589 DBOD. No. Dir. BC.107/13.03.00/2011-12. This rule is applicable to existing home loans. However, this rule is applicable only to floating rate of interest loans. The pre-payment penalty on loans taken on fixed-rate continues to hold.
I took a car loan two years ago at 8.5%. Like a home loan, will the bank increase the interest rate for my car loan also?
It will depend on whether the loan was extended on a floating rate or a fixed rate. Please check your sanction letter for details. If on a floating rate basis, then on an increase or decrease in MCLR for that tenor, your loan interest rate will move accordingly. If on a fixed rate basis, the rate does not change throughout the tenor.
Can I take a joint loan with my brother to renovate our family house?
Yes, you may, but first, the ancestral property has to be transferred to you and your siblings. Second, all siblings/ register-ed owners of the property have to be joint applicants to the loan.
Is it possible to pay off a home loan within one year?
Yes, it is very much possible, if you have the surplus to pay the loan off.
I had taken an education loan for my son’s education. Now I want to take a similar loan for my daughter’s higher education. Will the bank lend as I have retired from service last month?
Your daughter may secure an education loan with a guarantor substituting the parental co-obligation. Depending on the course she is selected for and the loan amount, the guarantor may have to furnish tangible collateral security.
Do I have to get a credit score to take a loan to purchase a car?
Yes, the credit scores are checked by banks while evaluating a loan application. Having a high score will get you a loan with better terms and lower interest rate.
The writer is founder, AZUKE Personal Finance Advisory. Website: azukefinance.com
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