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MCLR and CIBIL Score are interrelated to an extent. Both have some terms that are common in some instances depending on the different type of loans and other considerations.
How Will Creditseva Help You
Creditseva will help in clearly understanding the interrelation between MCLR and CIBIL Score so that the individual has a clear picture of both the terms.
The meaning of MCLR: MCLR is a lending rate that is new and it has replaced the Base Rate that was applicable on loans earlier. MCLR is calculated by considering the factors that are listed below.
MCLR is going to be applicable on new loans that are going to begin from the beginning of the fiscal year 2016-17. Therefore any new loan that has been taken by an individual is going to be based on MCLR. According to RBI, MCLR is calculated for each and every loan product and it will be tenure of 1-year or lower than that. The final decision will be made by the banks when it comes to the MLCR.
The loans that are linked to MCLR will be reset for a period of maximum one year. In this case, the individual will have a new interest rate on the home loan at a time that has been pre-decided and for a maximum period of one year.
All loans are not going to come under this rate. Some loans like the loans that are covered by government schemes are exempted from being linked to MCLR.
Correlation between MCLR and CIBIL Score
If you want to avail a home or a car loan at the rate of interest that is the lowest, then you need to make sure that you have a high CIBIL Score.
MCLR and CIBIL ratings are not directly related. But CIBIL scores are known to affect the chances of an individual in getting a loan at the rate of interest that is MCLR-based.
In MCLR, the bank’s lending rate of interest is connected to the accumulative cost of borrowing that is incurred by the bank.
It has been observed that the repo rate has not been included while making calculations. The banks are dependent on CASA and the deposits for the purpose of calculation of the rate of lending. Many of the banks follow the process of calculating the average fund cost.
Guidelines to Be Followed with Respect to MCLR
- The Banks should review and publish the MCLR that is related to different maturities for every month on a date that is pre-announced.
- The rate of lending that is finalised by the banks will be calculated by the addition of the spread to MCLR rate.
- There will be no link up of MCLR with Personal loans, auto loans.
- Once a borrower has taken a loan on MCLR, he cannot switch again to the base rate system.
- If you are an individual who is planning to take a home loan from an existing buyer, then you can switch to MCLR method
- Since MCLR applies to Banks, there is no relation between the MCLR to the home loans that are offered by NBFCs
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