This article is intended for HSBC Home loan or Smart Home Loan customers who took loan before 01-July-2010, where home loan was linked to HSBC RPLR system. You can also use it for other private banks where your home loan is linked to their RPLR instead of Base Rate, however steps could differ.

I am assuming that many of you are paying interest rate much higher than current market rate. In some cases, HSBC is charging interest greater than 13%, and it keeps moving upward. The current market rate is between 9.5% and 11% depending on the banks and products offered by the banks.

If you are one among those customers, this review could be useful to you.

Before I suggest remedy, let me explain impact of 1% higher interest.

Assuming you have taken loan of Rs 20 Lakhs, 1% higher interest rate can result in loss of Rs 20,000 to you every year.

Yes, it is always possible to transfer your loan to another bank, but it’s a daunting task at times. You will also have to pay pre-closure penalty and pay processing fee to new bank. However, you should be prepared to move to another bank if you are indeed paying such a high interest rate and not able get good interest rates revision from HSBC, as it will work out cheaper in the long run.

Let me provide alternative approach:

Step 1: Request HSBC to reduce to interest rate explaining current market rates. You can do it by simply calling their call centre. Please do your homework properly and explain what other products are better than HSBC products. Be prepared to walk away from HSBC at this point of time. Of course, don’t listen to any nonsense given by their call centre or business team.

Step 2: HSBC will reduce their interest rate to the best possible rate that is currently Base Rate + 2%. In other words, 10.5% assuming base rate is 8.5% and hasn’t changed since RBI announced rate changes on 02-May-2011.

Step 3: Once the interest rate has been changed, request HSBC to change interest rate to Base rate system from their RPLR system. You can use attached template for requesting this change:

Ideally HSBC should upload word template on webpage or allow you to send secure message from your account. But if they make it so easy, it will result in lots of losses to them.

Note that step 3 is very important as it will save you from future hike in RPLR interest rates because it increases more often than Base Rate. For your information, HSBC increased their Base Rate by 1% in the last six months while their RPLR increased by 2% in the same time period. It means that if you don’t follow step 3, you could end up paying 1% more interest in the due course of time.

If everything goes well, you will see interest rate reduction within 4 days and Base rate conversion within 2 weeks. Note that it took me more than 2 months to achieve it because HSBC staff did not know their own process and I needed to follow up at least 10 times to get application form copied here, and escalate this matter to their highest management.

Agreed that it is still higher than market rate, but it will provide you results within a month. If you have time and if you are ready to lose some money initially, you should strongly consider moving your home loan to another bank mainly Government run banks like SBI.

Yes, I am fully aware that Government banks take a long time to approve loans and it’s still worth for your hard earned money.

Wish you all the best!