SBI loan interest rates up 15 bps. Prepare to pay higher EMIs

15 bps interest rate hike in SBI loans

 SBI loan interest rates up 15 bps

The State Bank of India is one of the leading banks in the country that offers a host of banking products to customers. The bank’s loan products are quite popular among borrowers as the quantum is optimal and the interest rates affordable.

In a recent move, SBI hiked its Marginal Cost of Lending (MCLR)rates across its loan products. The MCLR has increased by 10 to 15 basis points across all loan tenures. The increased MCLR will come into effect from 15th November 2022 and will increase the potential EMIs of new loans taken after this date.

MCLR – the concept

The Marginal Cost of Lending Rate, or MCLR, is the minimum rate at which banks can offer loans. It was introduced in 2016 by the Reserve Bank of India (RBI). Today, the MCLR is like the benchmark rate for banks to offer their loan products.

The MCLR hike

Here’s the hike in the MCLR that SBI has affected across different loan tenures –

The MCLR hike

Why did SBI increase the MCLR?

SBI has increased the MCLR thrice in the near past and might also continue in the future. The reason is the rising inflation rate which is not under SBI’s control. The MCLR might increase in the future, too, unless the inflation rate reduces to 2% to 6% brackets which the RBI wants.

What does it mean for you?

If you are an existing borrower or thinking of availing of a new loan, the increased MCLR will put a strain on your budget as it would entail increased EMIs. So, when availing of loans, assess the increased EMIs and try to choose such loan details that will give you affordable EMIs.

Related - Know how MCLR affects your loan EMIs

Other steps that you can take to make your loan more affordable include the following –

1. Try and reduce the repayment tenure
A reduced repayment tenure will help you repay the loan early and save on interest costs. So, opt for a reduced tenure if you can afford higher EMIs.

Also, do not go for an extension of the existing loan tenure. It will mean higher interest payments. Instead, repay your loan sooner and close your debt.

2. Prepay your loans partially
Partial prepayments help in bringing down the outstanding loan amount. As the outstanding amount decreases, so do the interest outgo. So, if you have savings at your disposal, try prepaying the loan partially to bring down the interest cost.

3. Foreclose high-interest loans
Foreclosure means paying off an outstanding loan before the scheduled repayment tenure. Foreclosure closes your loan account, and you can avoid interest payments. So, use your savings or redeemable investments and foreclose loans with high interest rates.

The bottom line

Affordable loan EMIs are needed to easily repay your loan without incurring late payment charges and damaging your credit score. The MCLR is not under your control. You can, instead, manage your loan smartly to reduce the interest cost and save even when the interest rates are increased.

Related - Avoid these money behaviours that can lead you to debt

Here's what you need to know about the MCLR

The State Bank of India is one of the leading banks in the country that offers a host of banking products to customers. The bank’s loan products are quite popular among borrowers as the quantum is optimal and the interest rates affordable.

In a recent move, SBI hiked its Marginal Cost of Lending (MCLR)rates across its loan products. The MCLR has increased by 10 to 15 basis points across all loan tenures. The increased MCLR will come into effect from 15th November 2022 and will increase the potential EMIs of new loans taken after this date.

MCLR – the concept

The Marginal Cost of Lending Rate, or MCLR, is the minimum rate at which banks can offer loans. It was introduced in 2016 by the Reserve Bank of India (RBI). Today, the MCLR is like the benchmark rate for banks to offer their loan products.

The MCLR hike

Here’s the hike in the MCLR that SBI has affected across different loan tenures –

The MCLR hike

Why did SBI increase the MCLR?

SBI has increased the MCLR thrice in the near past and might also continue in the future. The reason is the rising inflation rate which is not under SBI’s control. The MCLR might increase in the future, too, unless the inflation rate reduces to 2% to 6% brackets which the RBI wants.

What does it mean for you?

If you are an existing borrower or thinking of availing of a new loan, the increased MCLR will put a strain on your budget as it would entail increased EMIs. So, when availing of loans, assess the increased EMIs and try to choose such loan details that will give you affordable EMIs.

Related - Know how MCLR affects your loan EMIs

Other steps that you can take to make your loan more affordable include the following –

1. Try and reduce the repayment tenure
A reduced repayment tenure will help you repay the loan early and save on interest costs. So, opt for a reduced tenure if you can afford higher EMIs.

Also, do not go for an extension of the existing loan tenure. It will mean higher interest payments. Instead, repay your loan sooner and close your debt.

2. Prepay your loans partially
Partial prepayments help in bringing down the outstanding loan amount. As the outstanding amount decreases, so do the interest outgo. So, if you have savings at your disposal, try prepaying the loan partially to bring down the interest cost.

3. Foreclose high-interest loans
Foreclosure means paying off an outstanding loan before the scheduled repayment tenure. Foreclosure closes your loan account, and you can avoid interest payments. So, use your savings or redeemable investments and foreclose loans with high interest rates.

The bottom line

Affordable loan EMIs are needed to easily repay your loan without incurring late payment charges and damaging your credit score. The MCLR is not under your control. You can, instead, manage your loan smartly to reduce the interest cost and save even when the interest rates are increased.

Related - Avoid these money behaviours that can lead you to debt

Here's what you need to know about the MCLR

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