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Reset Clause

What is Reset Clause on Fixed Rates in loans
Asked by Ankita Shrivastava | April 02, 2013 | Report this Report abuse
Replies (2)
A reset clause in a fixed loan means, unlike popular belief, the Loan interest rate would no more remain fixed for the entire tenure. It would be subject to a revision on a regular basis either two years or more depending on the decision taken by the bank from time to time.
April 10, 2013 | Report this Report abuse
Banks have introduced the reset clause for home loan agreements so that bank can raise interest rates in case the market rates raises.This effectively makes fixed rate loans equivalent to floating rate ones.
This is a disadvantage for the borrower as it gives the banks an escape from interest rate surges. Typically, the period for such reset clause varies from two to five years depending on the bank or housing finance company you borrow from.
April 06, 2013 | Report this Report abuse
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