The scheme offers two options – one where the customer is not allowed to make any pre-payments during the fixed-rate period and the other where he/she can do so, as per certain terms.
The fixed rates in option 1 range from 11.25% per annum (if the initial fixed-rate period is one, two or three years) and 11.50% (fixed-rate period of five years). For the flexibility of pre-payment offered in option 2, the bank will charge 25 basis points higher than in the first option as interest.
But, if you choose the five-year fixed-rate option with flexibility to pre-pay, the structure will be a little complex. Prepayment of over 25% of the outstanding amount will attract charges of 5% in the first year, 4% in the second, 3% in the third, 2% in the fourth and finally 1% in the fifth year. Upon expiry of the fixed rate period, the interest rate will be linked to the bank’s rate prevalent then. So, for the balance tenure, the loan will carry an interest rate of base rate plus 2%.
Source: The Economic Times, New Delhi
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