by Interest spread clause Banks charge a spread over the MCLR which usually remains constant throughout the loan However there may be a reset clause that allows the lender to reset the spread of the loan between 25 to 75 bps However at times there maybe special offers or discounts which brings down the spread, a change in the spread can change the rate of interest at which you repay the loan So you should pay attention to when the lender could revise the spread, under what conditionsPrepayment clauseMost banks, HFCs cannot impose any penalties on prepayment However there may be certain other conditions governing prepayment such as the number of prepayments you can make in a year or even throughout the loan period the minimum amount you can prepay etcClauses allowing amendments to the agreementSuch clauses give the lender the power to unilaterally alter the terms of the agreement The borrower must ensure that their written consent is required to alter any of the terms of the loan agreementClauses on defaultDefault generally means not paying your EMI However the term can have other meanings such as any civil or criminal offence on the borrower death of the borrower divorce of the coapplicants of the loan or even default on any other loan taken by the borrower Understand these terms carefullySecurity cover clauseIn case the value of your property falls you may be liable to pay an additional security amount against your outstanding home loan amount It is advisable to go through this clause thoroughly as it can have a major impact on your finances
Published in The Times of India (Online) (31.05.2024)