The short answer is YES, if you are looking for liquidity; and NO if you have enough cash at hand.
People are especially spooked by the possible impact that is mentioned by SBI
People are especially spooked by the possible impact that is mentioned by SBI
- "Impact in case of Auto Loan – For a loan of Rs.6 Lacs with a remaining maturity of 54 months the additional interest payable would be Rs.19,000 approx. equal to additional 1.5 EMIs.
- Impact in case of Home Loan – For a loan of Rs.30 Lacs with a remaining maturity of 15 years, the net additional interest would be approx. 2.34 Lacs equal to 8 EMIs"
The bank is spot on about the impact but the impact is not so much if one understands how a loan product works.
However, given the psychology of the customers about the notional impact they see that is spread over the entire loan term (typically 20 years for a home loan), the bank might have decided to alert the customers about the potential impact beforehand so as to avoid any unpleasant communications afterwards.
I think the bank could also have mentioned about a recourse of reducing the impact e.g. if you increase your EMI by around 2%, the additional 8 EMIs would be effectively nullified. But then the banks would need to revise ECS mandates, post dated cheques etc.
It's high time RBI introduced a variable ECS (with upper limits if need be) mandates so that any changes the interest have an instant impact on the EMI amount.
I will recommend once again: Blindly go for the 3-month deferment if you really need a liquidity. The impact is not beyond the simple interest charged to you on the outstanding loan amount.
However, given the psychology of the customers about the notional impact they see that is spread over the entire loan term (typically 20 years for a home loan), the bank might have decided to alert the customers about the potential impact beforehand so as to avoid any unpleasant communications afterwards.
I think the bank could also have mentioned about a recourse of reducing the impact e.g. if you increase your EMI by around 2%, the additional 8 EMIs would be effectively nullified. But then the banks would need to revise ECS mandates, post dated cheques etc.
It's high time RBI introduced a variable ECS (with upper limits if need be) mandates so that any changes the interest have an instant impact on the EMI amount.
I will recommend once again: Blindly go for the 3-month deferment if you really need a liquidity. The impact is not beyond the simple interest charged to you on the outstanding loan amount.
