Long term loans to go cheaper

The long term loans such as home loans and education loans are going to get cheaper as banks are passing the benefits of reducing the base rate to the customers. Some banks including State Bank of India, Central Bank of India and Union Bank of India has already announced to cut the interest rates on Home loans and educational loans.

The State Bank of India (SBI), the leading public sector bank has recently announced to cut interest rate on education loans by 25-100 basis points (bps) across various maturities.

One basis point (bp) is equal to hundredth part of the one percent means .01%.

According to SBI release, a 25 bps reduction has been done in the interest rate up for up to Rs. 4-lakh educational loans making it 11.75% from currently 12% rate of Interest (ROI).

For educational loans between Rs 4 lakh to 7.5 lakh, the rate reduction is 100 bps to 12.50% as against earlier 13.50% while for the loans of above Rs 7.5 lakh, rates have been cut 25 bps to 12.25% from earlier 12.50%.

Girls student would get addition concession of 0.50% ROI on educational loans from SBI, the country’s largest bank informed.

All the loan rates would be effective from February 20, 2012, added SBI.

Earlier, another state-run lender, Central Bank of India on February 17 has announced to cut 25-50 bps ROI on home loan in the move to aggressively reaching the credit target for this financial year going to close on March 31, 2012.

For home loan up to 30-lakh, CBI would charge ROI 10.75% from earlier 11% (a 25bps reduction), for loans between Rs 30 lakh and Rs 75 lakh, ROI would be 11% from earlier 11.50%, a 50 bps reduction while for more than Rs 75 lakh loans, CBI would charge 11.25% ROI as against earlier 11.50%, a reduction of 25 bps.

The repayment period for these offers is between 10 and 25 years. This rate will be reviewed on March 31, 2012.

The Bank of Maharahstra (BOM), a state run bank has also announced to reduce its base rate - the ROI which banks offer to its privileged customers by 10 bps from 10.70% to 10.60%. Base Rate is the lowest bank rate of any long-term loan. BOM offers home loans of up to Rs 5 lakh at the base rate.