Have you ever wondered if the interest rate on your existing loan is higher than what banks are currently offering to new customers? This question often arises in the minds of borrowers who wish to ensure that they are getting the best possible deal. In this interactive blog, we will delve into this matter and provide insights to help you understand and address the situation.
First lets understand How Interest rates work.
At the time of disbursement bank commits you rate which consists of Base Rate (Repo Rate, MCLR, PLR, TBLR) plus / minus Margin on base rate.
Why Your Existing Loan Interest Rate Might Be Higher compare to new customer
Change in Base rate: Rate of Interest on all long-term loans are linked with base rate and currently major banks are giving loan linked with Repo Rate, NBFC are giving loan linked with PLR and some foreign bank are giving loan linked with TBLR. Base rates fluctuate based on market conditions, economic factors, and monetary policies and other factors which directly affects the base rate. Whenever this base rate changes it directly affects the applicable rate on your existing loan. But it is possible that bank reduced their margin to acquire new customer and start offering loans at lower rate. In such scenario new customer may get better rate than existing customers.
Steps to Determine if Your Interest Rate is Higher
Research Current Rates: Research and compare the interest rates currently offered by different banks for similar loan products. This will give you a benchmark to assess the competitiveness of your existing loan interest rate.
Review Your Loan Documents: Review the loan agreement or documentation provided by your lender. Look for details such as the interest rate, the calculation method (fixed or variable), and any terms or conditions related to interest rate revisions.
Contact Your Lender: Reach out to your lender and inquire about the current interest rates they offer to new customers. Share your concerns and express your desire to explore options for reducing your interest rate.
Negotiate with Your Lender: Negotiating with your lender to lower the interest rate on your existing loan. Highlight your positive payment history, improved credit profile, and the fact that you are a valued customer and other banks are ready to lend you at lower rate.
Consider Refinancing: If you find that your existing loan interest rate is significantly higher than the rates offered to new customers, and bank is not ready to reduce your rate then refinancing may be an option worth exploring. Refinancing involves obtaining a new loan from another lender at a lower interest rate to pay off your existing loan.
If you’re wondering whether you’re paying more than you should on your existing loan, it’s time to act! By diving into the current market rates, reviewing your loan documents, reaching out to your lender, and considering options like refinancing or negotiation, you can potentially slash your interest rate and keep more money in your pocket. Don’t settle for being stuck with a high rate while banks are offering lower ones to new customers. It’s time to challenge the status quo and ensure you’re getting the best deal possible. Take control of your loan and make those interest rates work in your favor!