HDFC Bank hikes loan interest rates; EMIs to increase further

HDFC Bank has hiked its marginal cost of funds-based lending rates (MCLR) by 5 basis points across tenures. The new loan interest rates are effective from March 7, 2023, as per HDFC Bank’s website.

HDFC Bank loan interest rates
HDFC Bank has hiked MCLR by up to 5 basis points (bps). According to the bank website, the overnight MCLR is now 8.65%. The MCLR for one month is 8.65% and the three-month and six-month MCLRs will be 8.70% and 8.80%. The one-year MCLR, which is connected to many consumer loans, will now be 8.95%, the two-year MCLR will be 9.05%, and the three-year MCLR will be 9.15%.

Effective Date: March 7 , 2023
Tenor	MCLR
Overnight	8.65%
1 Month	8.65%
3 Month	8.70%
6 Month	8.80%
1 Year	8.95%
2 Year	9.05%
3 Year	9.15%

Source: Bank website

Also read: Prepay this much of your home loan to save Rs 17 lakh interest

Note that the bank also applies a margin in addition to the real interest rate. Your EMI may increase, as indicated by the table, as a result of an increase in MCLR. The margin that the bank charges is based on a number of variables, including CIBIL score, type of employment, etc. Your real EMI outlay increase will be determined by the bank's margin charge plus the MCLR.

Here is a look at few important FAQs on home loans as per the HDFC Bank website.

What does an EMI mean?
The term "EMI" stands for "Equated Monthly Installment," which is the sum you must pay to us on a particular date each month until the loan is fully repaid. According to the HDFC Bank website, “The EMI comprises of the principal and interest components which are structured in a way that in the initial years of your loan, the interest component is much larger than the principal component, while towards the latter half of the loan, the principal component is much larger”

What does encumbrance refer to?
Encumbrances on property are claims or charges placed on the property as a result of liabilities such as unpaid loans and bills. It is vital that you investigate properties that are free of all encumbrances during your house search.

What is a Balance transfer loan ?
As per HDFC Bank, “Transferring your outstanding home loan availed from another Bank / Financial Institution to HDFC is known as a balance transfer loan. Any borrower who has an existing home loan with another bank/HFI in which he/she have had a regular payment track of 12 months ,can avail a balance transfer loan from HDFC.”

In how many installments can you disburse the loan to me?
“Once we receive your request for disbursement, we will disburse the loan in full or in installments, which usually do not exceed three in number. In case of an under construction property, we will disburse your loan in installments based on the progress of construction, as assessed by us and not necessarily according to the developer’s agreement. You are advised in your own interest to enter into an agreement with the developer wherein the payments are linked to the construction work and not pre-defined on a time-based schedule, “ according to the HDFC Bank website.

Can I repay my loan ahead of schedule?
As per HDFC Bank, “Yes, you can repay the loan ahead of schedule by making lump sum payments towards part or full prepayment, subject to the applicable prepayment charges. We also offer a free-of-charge facility to accelerate your loan repayment called ‘Accelerated Repayment Scheme’. This option provides you the flexibility to increase the EMIs every year in proportion to the increase in your income which will result in you repaying the loan much faster.”