Should interest rate only be considered in choosing a home loan?
By Joseph Samson
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If the lending history of a bank suggests that it has subsequently reduced its PLR in the past with reduction in policy rates and also raised PLR at comparatively lesser frequency in response to hike in policy rates, it is an indicative that the bank is acting towards passing on benefits to the customer.

Reset clause: In case a borrower is opting for a complete fixed rate house loan scheme, then he is advised to take a good look at the loan proposal and at the ‘reset clause'. The reset clause set by banks says that it has the right to change the terms of a fixed rate loan after a fixed time during the tenor of the loan. Change may be in terms of interest rate too.

The reset clause period differs from bank to bank. It is advised that the borrower set his reset clause after a period of three years or so in order to avoid immediate fluctuations.

Benefit offered to old customers: Usually banks come up with new and attractive loan offers which are applicable only to new customers. The idea behind is to attract more and more customers to the bank and thus increase the customer base. Many banks do not allow old customers to switch to new schemes and even if they are allowed, it is at the cost of some additional charge.

The borrower thus needs to find how much benefit an old customer gets in case he wishes to later switch to a more lucrative new scheme. Old customers are also advised to switch on to the base rate system of loan pricing as it is a more transparent method.

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