How rate of interest scheme in bank works?
When I was looking at SBI site, I got this info:
Loan Amount
Rate of Interest*
For loans upto Rs.4 lacs - 3.50% above Base Rate, currently 13.50% p.a.
What does it mean? interest rate is 13.5 or 3.5? I could not understand terminology.
also it says:
1% concession for full tenure of the loan, if interest is serviced promptly as and when applied during the moratorium period, including course duration
what is that?
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The interest rate is 13.5%
The Reserve Bank of India has made it mandatory to quote all variable loans as "Base Rate + Spread". The Reserve Bank has given a guideline / formula to calculate the Base Rate. All loans should be above Base Rate. Currently the Base Rate for SBI is at 10%. So you are getting a variable rate of Interest. If the base rate changes from 10 to 11%, your interest will become 14.5%. If the base rate goes down from 10 to 9%, you rate will become 12.5%.
If you make monthly re-payments on time throughout the loan duration, then you will get a discount of 1% in the rate of interest.
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