SBI Home Loans without Pre-Payment penalty
SBI has decided to waive Pre-payment charges on home loans to both Floating and Fixed rates, for old and new home loan customers. With this decision, SBI is the only bank which does not charge any fee from pre payment their home loans or before end of the loan term.
Banks and Housing Finance Companies Charges upto 2-4% as prepayment penalty on the loan amount if a borrower settles the full payment before maturity by switch another lender. No penalty offers if borrower’s pre-payment home loans with their own money or funds.
Housing finance companies charge a fee if the loan is contracted on a fixed rate and if it is not finance from the customer’s own earning. SBI is the first bank, decided to waive off pre-payment penalty for new customers.
Thoughts behind this decision are –
1.The idea is to provide customer convenience.
2. It was aimed at doing away with the parity between old and new customers.
3. If the service is good customers will stay anyway,” SBI personal loan department.
SBI home loan outstanding portfolio stands at around 87000 cr at the end of March 2011, had surprised up the home loan market three years ago during the tenure of its previous chairman OP Bhatt by offering a special scheme featuring a fixed interest rate in the initial years.
After SBI Schemes, HDFC offers the same scheme in home loan. The new move by SBI is bound to forces its competitors HDFC and ICICI Bank.
SBI Already controls 20% market share of Loans and Deposits in Banking Sector. RBI told banks to voluntarily waive off pre-payment penalty on home loans when interest was charged on a floating rate basis.
Axis Bank Home loan is the only home loan which does not charge any fee on prepayment even if the customer is shifting to another bank. Nischint home loan offers with the rate being fixed at 11.75% for the entire tenure of the loan, which are 20 years and only 2% prepayment charge on fixed rate.
All Housing Finance Companies have waived off prepayment penalty on floating rate loans from October 19, but they continue to charge penalty – ranging from 2-4% -on fixed rate loans. Among other banks, ICICI Bank charges a penalty of 2-4%.
“The income earned from pre-payment charges is minuscule at around Rs 3-4 crore. It was imposed more as a deterrent for switching from one bank account to another,” LIC Housing Finance.
Processing your request, Please wait....
