Interest rate spread banks interest rate spread is one of the many banking jargons that we often come across in simple words interest rate spread is the difference between the interest rate that a bank charges on its loans to private customers and the interest rate that it pays its customers on their deposits a banks interest rate spread on any loan is calculated on the basis of a Number of factors such as tenure risk credit loss profit requirement operating cost demand in the market and specific risk assigned to an individual customer as a homebuyer it is important for you to know the interest rate spread involved in the home loan you take from your bank the interest rate on your loan has two components marginal cost of funds based lending rate or mclr and the interest rate spread until March 31st 2016 .
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The first component was base rate or the benchmark rate below which a bank would not lend its customers however in its first bimonthly review of its monetary policy on April 5th 2016 the Reserve Bank of India replaced the base rate with mclr now on all loans given since April 1 banks charge an interest rate that is a combination of mclr and spread mclr is based on the banks cost of raising incremental funds and involves five or more rates depending on .
Periodicity spread meanwhile is the margin for profit that the bank wants to price in into its loan product for example if you take a home loan of rupees 10 lakh for 20 years at the rate of 10.5 percent and the mclr at a particular point of time is 8.5% the interest rate spread on the loan is 2% later if the bank revises its mclr to eight point two five percent but the interest rate on your loan remains unchanged at 10.5% it implies .
Bank has increased its profit margin by tweaking its spread to two point two five percent thank you for watching this video if you want us to simplify any other real estate terms please write in the comment section below hit like if you like this video and subscribe to our channel to decode more real estate juggles you .
Insurance company may owe more in payouts than they have and once they run out of money well then no one would get money for their destroyed car like they thought they would reinsurance is necessary and important to ensure that insurance companies remain profitable and solvent to pay insured when there are claims in terms of claims insurance companies .
Also don't just automatically pay out if you have car insurance and you show them a crashed car the insurance company will investigate to make sure that you didn't intentionally crash your car to get the payout if they find out that you did do that well that's called fraud and you can go to jail faking insurance claims actually does happen quite frequently people see it as a way to either get a .
That you are not defrauded well then you can make a lot of money conversely if you buy insurance and something bad happens it can save you a lot of money in most cases insurance is a winning formula for all parties involved it helps consumers be less worried about bad events and it makes companies a lot of money and that's basically how insurance works see i told you it was going to be interesting .
Maybe hopefully hopefully that was interesting otherwise i don't know why you're still here um but we have more videos that you could probably click on right here that might be interesting or or there's probably if you're just tired of hearing my voice you could click over to the right there's probably other people's videos but enjoy your day thanks for learning about insurance .
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