Want to reduce interest rate on your home loan?
Lenders have always meted out step-motherly treatment to their existing home loan customers. Over the last few months, we have seen home loan interest rates falling significantly for new customers. However, lenders have not reduced interest rates for existing home loan customers. Remember:
- Most banks will offer you home loan online but they won’t allow you to reduce the interest rate online. In most cases, you will not get a rate conversion quote online. Even if you get a quote, you will have to visit the branch for doing the paperwork.
- Banks/Lenders are banking on your laziness. If you are not ready to visit their branch and do the paperwork, you will continue to pay higher interest rate.
- Don’t get dissuaded by the difficulty of the process as it will cost you. On a 50 lacs loan principal outstanding, if you save 0.5%, it is around 25 000/annum saving. Even after taking tax consideration, it will be substantial amount.
Most banks ensure that if you are not alert and aware, you will pay for your laziness by paying higher interest rate. Clearly, laziness is not an option if you want a fair treatment from your lender. I will tell you the difficulties I faced at HDFC in getting home loan interest rate reduced.
My HDFC experience
In the first fortnight of January, I sent an email request to HDFC telling about my desire to reduce the interest rate on my home loan. I had to send them an email as I was unable to get a quote online. I got a reply that by paying 575 rupees, I can reduce my interest rates from 9.75% to 8.65%. I was pleasantly surprised.
It was a different story when I visited their branch. I was shocked to learn that the offer that they emailed, was no longer available. The new offer was to pay 5000+ tax and the interest rate will be reduced to 8.9% from 9.7%.
I decided to escalate this issue and sent one more mail to HDFC. In the email, I wrote that HDFC is behaving in an unethical manner. Furthermore, I was left with no option but to switch home loan to other lender. They came back to me and told me that mine was an exceptional case. As a measure of their goodwill (:)), they will reduce interest rate on my home loan to 8.65% (from 9.7% earlier) if I agreed to pay around 8700 rate conversion fee. It was still a good deal for me and I agreed.
Process for getting home loan interest rate reduced
If you are an HDFC customer:
- Approach the nearest branch, carry your home loan account number. If your wife is a co-borrower, she will need to accompany you. Carry your chequebook. If you can get, also take one rupee revenue stamp.
- Ask them for home loan interest reduction and they will tell you the latest offer. If you are paying more than 9%, you must insist on sub 9% home loan interest rate.
- Make a cheque and sign the documents. Your home loan interest rate will be reduced.
For more details, do have a look at this article. Home loan EMI is normally a big part of our monthly expenditure. It can impact our financial plan. As a customer, it is our right to pay an interest rate that is inline with what new home loan customers are paying. However, onus of getting a fair deal this is on us.
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