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Date : Aug 15, 2009

Question

Hi, I have an existing housing loan from GE Money at 11.75% floating ROI. Recently, I learnt from other sources that GE money reduced their bench mark rate by 50 basis points effective 1st Aug'09. Upon enquiring from GE Money, I was told that it has been reduced but this reduction has not been applied in my case. I was furious and asked them the reason for this and they had not answer. Later, I recieved call from GE Money that my ROI has also be reduced but it will be effective from 1st sep 2009. Is this not an unfair trade practice by GE money? How can they be selective in reducing the rates when it is clearly written in sanction letter that it is linked to the bench mark rate. They also have a clause that no prepayment can be made in the first twelve months. Now, my 12 months are getting over in Sep'09. I am planning to transfer my loan to a bank but then GE Money is charging 2% penalty for foreclosure which will come to almost 1Lac. GE money Wizard branches are closed and they are not appraochable where I can discuss with them face to face rather than calling their call center who not customer friendly at all. Can I tell them to waive off or reduce the charges since they have no branches and their service is dealing with their customers is pathetic? Also, I want to transfer this loan to a bank that will have minimum charges. I am thinking SBI, what do u suggest?

Answer

If you have surplus funds and you can also pre-pay a part of the home loan as it will reduce the monthly EMI burden. Quite a few banks do not charge pre-payment penalty if the loan is prepaid partially. The definition of what constitutes partial pre-payment varies from bank to bank. Most banks will charge prepayment penalty if you switch lenders.

Since you have taken a home loan at a floating rate of interest, it is anyways subject to change. You should explore the option of changing your home loan lender if you have maintained a good track record of repayment on the loan. Tax calculation can change the view on pre-payment. You can also check the 'Should I switch my loan' calculator on Apnaloan to check whether it makes sense to change the lender.

You may want to consider the prepayment charges payable to the exisitng lender and the processing fee to the new lender. You can check the home loan comparator to compare offers.

 

 

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