A one-percentage-point rate difference: calculate the rupee effect
A small-looking rate difference can matter over a long repayment schedule, but its value depends on the principal, term and switching costs. Translate the percentage difference into a comparable set of payments.
Hold the other inputs steady
Use the same outstanding amount and remaining months for both rates. Compare the total future payments, then deduct any costs needed to obtain the new terms. Keep top-ups and tenure changes in separate scenarios. Do not multiply the original loan amount by the rate difference and every original year; the balance can reduce over time and some years may already have passed.
A worked situation
A comparison of ₹5 lakh at assumed reducing rates of 12% and 11% over 36 months should use two amortising schedules. It is not the same as a flat saving of ₹5,000 every year on an unchanged ₹5 lakh balance. Add actual switching costs before drawing a conclusion.
| Scenario | Principal | Annual nominal rate | Months | EMI | Total instalments |
|---|---|---|---|---|---|
| Assumed 12% | ₹5,00,000 | 12% | 36 | ₹16,607 | ₹5,97,858 |
| Assumed 11% | ₹5,00,000 | 11% | 36 | ₹16,369 | ₹5,89,297 |
Your next-step checklist
- Use today's outstanding principal
- Compare the same remaining term
- Subtract the cost of obtaining the new rate
Does a one-point lower rate justify every transfer?
No. A small balance, short remaining term or large switching cost can outweigh the benefit. Use actual proposals and your expected repayment horizon.
Official references and further reading
These links help you check current information. A provider-specific page describes that provider’s process; it is not a universal eligibility rule or a claim of partnership.
General educational information, not a personalised credit recommendation. Examples use assumed inputs. Rates, charges, eligibility and documents vary; confirm your own lender’s current written terms.