LIC Housing Finance: No Internal Switching for Borrowers

Updated on November 30, 20182 mins read
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One of the most preferred NBFCs in India, LIC Housing Finance has decided to uphold it’s policy of not allowing borrowers to switch their home loan internally to a lower interest rate. This means that existing customers cannot avail the benefit of low interest rates, being offered to the newer customers of LIC.

“Even though LIC offers loan at low interest rates, over the years, the rates increase and then there is a big difference between what is being paid by old and new customers”, an ex-customer of LIC, Mr. Sharma said.

In a market where most banks and NBFC’s give the option of internal switching to their existing customers, this is a very unusual decision.

“According to our existing policies, there is no provision for old customers to switch to lower interest rate, the only way they can reduce their loan burden is by pre paying it”, said an LIC Official.

This makes matters difficult for several borrowers who cannot prepay their loan, and thus have no option but to pay a high interest rate. Let’s see how Mr. Sharma, an LIC Housing Finance borrower worked his way around it. Mr. Sharma is a 40 year old marketing executive. In 2009, he took a loan of Rs. 50 lakhs from LIC Housing Finance for purchasing his home in Borivali at an interest rate of 9.50% for a tenure of 20 years. Since the loan was under the 3-year Fix-o-Floaty scheme, the same interest rate applied for 3 years. Now he is paying an interest rate of 12.50% while LIC continues to offer loans to new borrowers at 10.25%! Since his initial request to LIC to lower interest rate was turned down, Mr. Sharma started reviewing his finances and budget so that he could pay off a substantial part of the loan to lower his interest burden. However, after a few months of rigorously cutting down expenses and saving, he thought that maybe switching to a lower interest rate could be a better option.

“After doing some research and talking to my friends I thought that switching my home loan to lower interest rate would be best as it will give me maximum savings.”, said Mr. Sharma.

On using our calculator he found that by switching to an interest rate of 10.15%, he could save as much as Rs. 35 lakhs on his home loan! This is when he decided to opt out of LIC and switched his home loan to SBI. For several other borrowers too, switching home loan to a lower interest rate has proved to be more beneficial than painfully savings up and prepaying their loan. It not only allows them financial flexibility, but also assures them of getting a cheap home loan deal. Use the calculator below to see how much you can save by switching you home loan to a lower interest rate. By signing up, you can have us do all the paperwork, formalities and visiting banks for you 🙂



Tarini comes with a degree in Mass Communication and Media studies. She joined SwitchME as a content writer and moved on to being an assistant product manager. Tarini is an experienced Content Strategist with a background in Product development and management. She is skilled in SEO, social media strategy and online content marketing and likes to travel when possible

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  1. name optional
    May 04 2015 at 5:50 pm

    LIC is cheater – they don’t allow you to get benefit of lower interest rates which they offer to new customers. There’s no choice of lowering your interest rate which will remain way too high than market rate – mine is 12% on home loan..

    • Priyanka
      May 06 2015 at 6:47 pm

      12% is really high, consider switching.

  2. raja
    Mar 10 2015 at 9:54 am

    Lichfl in the top to cheating customer. Plz don’t go otherwise u ll be rest of ur life…

  3. prakash
    Jan 30 2015 at 2:48 pm

    LICHFL is one of fraud home loan company.. Initially they offered low intrest rate and afterwards they show sky is the limit… Dont go for LIC home loan

    • Tarini
      Jan 30 2015 at 2:52 pm

      Hi Prakash

      An easy way out of paying sky high interest rates is by transferring your loan to another bank. You can use our home loan balance transfer calculator to find the cheapest bank for yourself.