Which bank is better to take home loan?

If you take a home loan of Rs.10 lakhs, and if you opt to repay in 20 years, it would be Rs.10,000 monthly installment. But that is two years back. Now with the same Rs.10, 000 monthly installments, you can clear the loan inn just 14 years. That means 6 years of early repayment. Are you not tempted of these figures. Don’t you want to run for a home loan? If yes, hurry up.

SBI @ 8%
SBI is offering home loans under easy loans scheme with only 8 % of interest. This 8% rate is applied for first two years and after that 8.5% for 3rd and 4th years. From fifth year onwards, if you choose floating rate, it would be 2.75 % less than the prime lending rate and if you choose fixed rate it would be 1.25 % less rate. Present prime lending rate of SBI is 11.75 %. These loans should be taken before 31st march 2010.

HDFC @ 8.25 %
HDFC has come forward to offer home loans at interest of 8.25 % for the first three years. From the fourth year onwards, 5 % less than prime lending rate (for floating). Presently prime lending rate of HDFC is 13.75 %. These rates will apply if you apply for the loan before 31st January and the loan is sanctioned before 31st march 2010.

ICICI @ 8.25 %
ICICI is also offering home loans at a interest rate of 8.25 %. But this is for the first two years only. After that 3 to 4 % less than prime lending rate is collected. This is depended on amount of loan taken. If the loan is below 20 lakhs, 4 % less than PLR, for 20-50 lakhs loan 3.5% less than PLR, for above 50 lakhs 3% less than PLR rate of interest is collected.

These rates apply only for those who apply for loan before 31st January and take the first installment of loan before 31st march 2010.

Which Bank to choose?
All these three banks are offering almost same interest rate for the first three years. While SBI is offering 8 % for the first year, and 8.5% for the next two years, HDFC is offering 8.25 % for the first three years and ICICI bank is offering 8.25 % for the first two years. With an overall view it is clear that we pay 20 % of the interest of the total 20 years span within first three years only. If analyzed, HDFC is offering low interest rate than others.

Even thought there are no differences in the first three years of repayment, with these 3 banks, there is a vast difference if the interest rates increase in the long run. Select those who offer maximum discount rate over PLR to avoid burden if the interest rates increase in future. So observe the PLR of each of them. Presently PLR of SBI is low as 11.75 % and HDFC PLR is high as 13.75 %. ICICI bank PLR is 12.75%. SBI PLR is low so it is offering low discount of 2.75 % after the scheduled period. HDFC with high PLR rate is offering 5 % discount. ICICI is offering 3 to 4 % discount. According to the present PLR, HDFC will stand low on interest after 3 years. Growth of PLR of HDFC may be low compared to others because of the present high PLR. Basically PLR is dependent on liquidity and demand.

Things to Observe before bank home loans:
Banking institutions are offering low interest in the name of special discounts to attract the costumers while there is a low demand of home loans. Don’t forget that these rates will apply for first 1 or 2 years. So enquire till when these rates apply and after that what rates will apply. Opt the schemes that prove affordable in the long run, not bothering about short run interest.

Also these rates will apply for new costumers only. Not for old costumers. New rates will apply for those who cancel old loan and take new ones. But think if this kind of change will be useful.