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Interest Rate and PLR

What is PLR and how does it impact home loan interest rates?

PLR stands for prime lending rate. It is the benchmark rate of interest at which banks lend to borrowers. When the Reserve Bank of India (RBI) takes measures to control inflation or liquidity, many public and private sector banks react by raising their benchmark lending rate. This makes home, personal and vehicle loans costlier, dampening credit demand.

Why go for floating rates in these conditions?

To float or get anchored is a vital dilemma for many borrowers at this juncture. Experts point out that rates at this juncture are still high and may drop further down. Since fixed rates are a few points higher than the prevailing floating rates, it makes no sense to get anchored.

When will existing borrowers benefit?

Only a few banks have reduced the interest rates for existing borrowers. In order to entice new borrowers in this dampened climate, low rates are offered to them. So for now, existing borrowers have to wait for rates to fall substantially before the benefit reaches them. Borrowers unhappy with their lenders can consider refinancing with another lender offering better rates.

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Mutual Fund Application Forms Download Any Applications
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Mutual Fund Application Forms Download Any Applications
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