Union Bank of India raises loan interest rates

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Union Bank of India has raised its marginal costs of funds-based lending rates (MCLR) by 15 basis points (bps) across all mandates. The revised interest rates are in effect from October 11, 2022 through November 10, 2022, according to the bank’s website. Loan interest rates were raised by up to 15 basis points (bps).

With the hike, the bank’s MCLR overnight rate is now 7.15% to 7%, while its one-month, three-month and six-month rates are now 7.30%, 7.50% and 7.70%, respectively. The one-year MCLR, two-year MCLR and three-year MCLR are 7.90%, 8.10% and 8.25%, respectively.

Personal Loan Program Interest Rates

The bank’s EBLR was raised to 8.70%, i.e. RBI Repo Rate (5.90%) + Spread (2.80%), with effect from October 11, 2022. In September , the EBLR was 8.20%.

RBI rate hike

The Reserve Bank of India (RBI) again raised the repo rate in a bid to fight inflation. In its latest monetary policy announcement on September 30, 2022, the central bank raised the repo rate by 50 basis points (bps; 100 basis points = 1%) to 5.90%. This is the fourth repo rate hike in 5 months in a series of hikes that started on May 4 this year.

Following the rise in the RBI, many banks including SBI, PNB, ICICI Bank, Bank of Baroda, Bank of India and mortgage lender HDFC Ltd raised their interest rates on loans. Yes Bank, HDFC Bank, Bank of Baroda and others have increased their MCLR on loans. Here is a quick comparison of banks and NBFCs that increased lending rates after the RBI hike, as well as some banks that increased their MCLR.

Existing borrowers, who have taken out variable rate loans such as home loans, will see their EMIs increase further. Most new borrowers, whether they handle fixed or floating rate loans, will be expected to pay higher EMIs for their loans as banks pass on the latest policy rate hike.

Here’s an overview of what home loan borrowers should do now.

Avoid term extension if you can afford higher EMIs

Whenever interest rates go up, lenders prefer to increase the term of the loan instead of the EMI, which is operationally easy to administer with their existing home loan borrower because they don’t have to modify the mandate of the IMS. However, this is not in the best interest of the borrower. Any extension of EMI increases the overall amount of interest payable. You can easily save this by asking your lender to keep the warrant intact as you are willing to pay higher EMIs.

Opt for partial prepayment

If you have a savings or investment that earns less than the interest rate you pay on our home loan, it is best to use it to partially pay off your home loan to control EMI expenses. However, you need to consider the tax benefit you get on the interest payment and principal repayment of your home loan. If the net profit is higher in prepayment, you should opt for prepayment. Otherwise, you can keep your investment intact.

Enter outstanding high interest

In addition to the home loan, if you have taken out expensive loans such as the personal loan, the durable consumer loan, the two-wheeler loan, the second-hand car loan or the revolving credit on a bank card, then rather than repaying by anticipating your home loan which is the cheapest loan, you should prefer grabbing these expensive loans to reduce the overall burden of IMEs in your monthly household budget.

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