No Prepayment Penalty: New borrowers will prefer housing finance companies?

The NHB's (National Housings Bank) recent circular waiving penalty on full home loan prepayment may give HFCs (Housing Finance Companies)  an edge over banks this festival season.

This  prepayment penalty  waiver will especially be useful for people who have taken loans from HFCs before 2010 and are paying interest rates as high as 13-14% even though new customers are offered 10.5-11.5% by the same lenders.

RBI (Reserve Bank of India) should also issue the same guidelines for banks to avoid a situation where HFCs have an advantage over banks.

Even the RBI may waive prepayment penalty soon. Something in a month or so because prepayment penalty is an important parameter for customers to choose a lender.

Now, SBI (State Bank of India), IDBI Bank and Axis Bank do not charge a prepayment penalty. However, most others such as ICICI Bank, HDFC Bank charge a prepayment penalty. Normally Banks charge 2-4% on balance loan amounts.
Many new borrowers to prefer HFCs for the sheer ease of being able to pay off loans whenever they had a surplus.

While the Reserve Bank of India has been talking about waiving the prepayment penalty, nothing has been officially announced.
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