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what is MCLR in home loan

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0 2022-01-03T10:49:46+00:00
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Hey, If you are anything like me. All these technical terms about loans and banking must confuse you. A friend of mine recently told me what is MCLR in loan. Take a look at my anwer to know more details.

What is MCLR rate in home loan ?

The full form of the term MCLR is

Marginal Cost of Funds based Lending Rate. MCLR can be deemed as the minimum lending rate set by a bank. The bank or the lender is not permitted to lend below the MCLR rate.

Previously there used to be a base rate system in place which dictated the lending rates for commercial banks. In the year 2016, Reserve Bank of India implemented MCLR on banks to determine and fix rates of interest for loans. The MCLR rate undergoes a change each year. The RBI decides the MCLR rate. 

Most banks can not lend lower than the MCLR. There are certain expectations to this rule as well. The bank (lender) can only decide if they will give you interest lower than the MCLR lending rate. You can speak with a bank of your choice and enquire about the MCLR. .

There are many factors on which  Loan eligibility dependents :

  •  Monthly income

  •  Current age,

  •  Credit score

  • Fixed monthly financial obligations

  • Credit history

  •  Retirement age etc. 

I hope your doubts about what is MCLR in loan have been cleared. Good luck on your home loan journey !

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