Bank Interest Rate
1. Spread rate depends upon risk profile of borrowers Banks check CIBIL score, income, profession, networth, and credit history.
Bank like to give loan to the people who don’t want loan.
2. Consumer must bargain to get good deal. Borrower should get loan sanctioned from 2-3 banks and show to rival banks. They reduce rates and then let them compete with each other.
3. Spread rate is fixed unless it’s changed by consumer by bank officials.
4. Floating interest rate is better. However, once interest rate become less than 7%, one can switch to fixed rate to avoid increase in future rate
5. We tend to bargain with Vegetable vendors so hard, we should do same with banks…
6. EMI shouldn’t be more than 30000 per person.If it’s more, then pay some loan and reduce loan principal
7. Transparency wise following is the order of interest rate types:
1. Repo rate linked rate
2. T Bill rate linked rate
3. MCLR linked rate
4. Base Rate linked rate.
5. Other formulas.
8. Interest consists of two components
First, MCLR which is fixed to all customers
Second, spread rate which is variable. Banks decide which spread rate to offer who, they charge more spread rate to risky customers.
9. Remember one principle to deal with banks. NEVER SHOW EAGERNESS TO LOAN, You must show that you have lot of money and you don’t need loan.