Switch home loan or stay with offer from current lender ?

POSTED BY nareshvalsa ON July 23, 2014 7:02 pm ONE COMMENT

Hello ,

I have taken a loan of 22 lacs from LIC running since last four years.At present outstanding loan is 20 lacs. Current interest rate is 11.75, too high.

I am planning to switch this loan to SBI, which is offering loan at interest rate of 10.15.

When I contacted LIC for loan switch they asked me to take another loan(top up) of 10 lacs from LIC at 10.10% for 2 years and do partial payment of the precious loan.

I can pay repay 50,000 per month along with my existing loan.I would like to  close my loan in 2 years. What should I do , switch the loan or stay with LIC ?

One reply on this article “Switch home loan or stay with offer from current lender ?”

  1. Credexpert says:

    Dear Mr. Naresh,

    Typically, it is beneficial to transfer a home loan when the interest rate differential is around 1%.

    However, in your case, you should calculate the savings you will make by paying an interest of 10.10% instead of 11.75% on your outstanding balance for the next 2 years. This should be done after deducting the charges for transfer, processing fees and any costs to be paid on transfer of home loan. If the difference (i.e your savings) is significant, you may go ahead with the transfer.

    Consider the top up loan and staying with the same bank only if it is beneficial to you as mentioned above. Also, opt for the top up loan only if you really require it.

    Regards,
    Credexpert

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