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Canara Bank new Home Loan scheme Does it make sense?

Canara Bank announced a new home loan scheme, marking a new high in the home loan battleground. It is not yet known whether Canara Bank will offer the new scheme to its own existing home loan borrowers.

Harsh Roongta

05 Mar 2009

Canara Bank yesterday announced a new home loan scheme clearly marking a new high in the home loan battleground. As consumers are still not very enthusiastic on clearly targeted at the existing home loan consumers of other banks, it is not yet known whether Canara Bank will offer the new scheme to its own existing home loan borrowers. 

 

The comparison charts for various loan slabs is given below:



















Table A

Loan Tenures in all cases is 20 years


Loan Amount - Rs. 5 lacs+ upto Rs. 30 lacs

LIC Housing Finance

Canara Bank/State bank  December Scheme

Canara Bank March Scheme

HDFC Limited

State Bank February Scheme

emi Per Lac

Rs. 884

916

930

Rs. 949

961

Interest Rate

8.75%

9.25%

9.46%

9.75%

9.94%

Processing Fees

0.50% - 1%

nil

nil

0.50%-1%

nil

Comments

Floating

5 years fixed and resettable thereafter. Only single owner and fresh purchase allowed.

1st year -8.25% fixed for 1st year and next 4 years - 9.25% fixed & 2% below BPLR (minimum 10%) after that.

Floating

8% fixed for 1st year and applicable floating rate thereafter. Current rate is 10.25%

Open for full/partial Disbursement till

till further notice

30th June 2009

31st December 2009

till further notice

30th April 2009

Pre-payment Charges

2%

2%

2%

3%

2%

Comments

 

Free Life Insurance

Blended Interest rate and emi given above

 

Blended Interest rate and emi given above

Changes in Interest Rate/EMIs

can increase/decrease at any time

can increase/decrease after 5 years

can increase/decrease after 5 years

can increase/decrease at any time

can increase/decrease after 1 year

Eligibility calculated as per

first year emi

first year emi

Data Not Available

first year emi

Second year emi based on current applicable floating loan rates

 

The scheme marked in yellow is good but available only for loans upto Rs. 20 lacs and the PSU banks are not really keen to push them as the scheme was announced under political pressure. So several barriers such as considering only a single person's income for eligibility and allowing only one person as a borrower (even husband and wife are not allowed as co-borrowers thus preventing them from claiming tax benefits), very high margins (about 25% of the cost of the property) and lower eligibility for the same amount of income ensures that this is not available for most prospective borrowers. LIC Housing Finance continues to be the cheapest but the Canara Bank scheme is worth considering also since it offers fixed interest rates for the first 5 years. If at the end of the 5 years the interest rate is higher than what is available in the market you can always shift your loan to another lender. Clearly, HDFC is much better than the well-marketed 8% scheme from SBI.

 

Loan Amount - Rs.30lacs+ upto Rs. 75 lacs

LIC Housing Finance

Canara Bank March Scheme

State Bank February Scheme

HDFC Limited

 

 

 

 

 

emi Per Lac

Rs. 949

962

990

Rs. 1,015

Interest Rate

9.75%

9.95%

10.37%

10.75%

Processing Fees

0.50% - 1%

nil

nil

0.50%-1%

Comments

Floating

1st year -8.75% fixed for 1st year and next 4 years - 9.75% fixed & 1.50% below BPLR (minimum 10%) after that.

8% fixed for 1st year and applicable floating rate thereafter. Current rate is 10.75%

Floating

Open for full/partial Disbursement till

till further notice

31st December 2009

30th April 2009

till further notice

Pre-payment Charges

2%

2%

2%

3%

Comments

 

Blended Interest rate and emi given above

Blended Interest rate and emi given above

 

Changes in Interest Rate/EMIs

can increase/decrease at any time

can increase/decrease after 5 years

can increase/decrease after 1 year

can increase/decrease at any time

Eligibility calculated as per

first year emi

Data Not Available

Second year EMI based on current applicable floating loan rates

first year EMI

 

For loans greater than Rs. 30 lacs and upto Rs. 75 lacs, the scenario does not change much with the ranking order remaining more or less the same except that the State Bank scheme is cheaper than HDFC in this case.

 

Clearly, the home loan market is hotting up with promise of more goodies to come in the near future. With builders beginning to price a little more realistically, we should finally see some consumer interest come into this sector.