If we were to list down some most popular loans in India, a Home Loan would certainly come in the top three contenders. The reason: people like to opt for a home loan so that they can buy their dream houses. But there is an important thing which every individual should keep in mind that it is important to choose the lowest home loan interest rates to reduce the burden on your pocket. When you choose the low-interest rates, the repayment amount would be lower as compared to higher interest rates.
Several lenders provide a home loan to customers at affordable interest rates. But why is it so important to choose the lowest home loan interest rates? Home loans are generally considered to be high-ticket purchases and taken for a long period of time usually 15 to 30 years. So, during this period, if you choose a high-interest rate, you will end up paying a huge interest amount. In this article, we will be telling some of the amazing methods by which you can choose the affordable home loan interest rates in India. So, if you are looking for a home loan and want to know the process, keep reading.
Methods to Choose Lowest Home Loan Interest Rates
There are a few methods that you should keep in mind to choose the lowest home loan interest rates among a wide range of options available in the market. We are showing some of them below. Have a look.
Higher Down Payment
Lenders provide a loan amount of 75% to 90% of the overall price of the value. The remaining amount needs to fund from the borrower’s own sources. This amount is known as the Down Payment Amount. So, if you want to choose the lowest home loan interest rates, pay a higher down payment amount. This will make your loan amount lower than before and due to this, lenders are more likely to provide you lower interest rates.
Compare all the Options
There are several kinds of lenders who provide home loans - Banks, Housing Finance Companies (HFCs) and Non-Banking Financial Companies (NBFCs). To choose the lowest home loan interest rates, it is important you go through all the options to see which one is more affordable to you. Some lenders also provide low-interest rates to their existing customers.
Compare Home Loan Interest Rates Option
Do remember that banks charge a fixed Margin/Spread/Premium over the Benchmarking rate they follow. This factor tends to vary according to several factors such as Loan Amount, Employment Type, Property Value, and most importantly Credit Score. Individuals with a high credit score (700 or above) can get the home loan at lower interest rates as compared to people with a bad score. Also, Salaried Employees tend to get the home loan amount at cheaper rates as compared to Self-employed professionals.
Make Prepayment of your Loan
If you have a habit of saving money, you can also use the saved money to prepay the loan amount to reduce the outstanding principal. It is advised to make the prepayment in the initial years of the home loan as the interest amount tends to be on a higher side during this time.
How Lowest Home Loan Interest Rates affect EMI Amount?
You must be thinking why it is important to choose the lowest Home Loan Interest Rates? Well, as we said that interest rates directly affect your EMI amount. Let’s show you this with an example.
An individual wants to opt for a 15-year Home Loan of 30 lakh. We are taking two different interest rates of 7.30% per annum and 8.99% per annum. The EMI Amount for the first interest rate (7.30% per annum) would be INR 27,471 while for the second interest rate (8.99%), the EMI amount would be INR 30,410.
So, you can clearly see the difference of INR 3,000 on choosing lower interest rates. So, you would be saving this amount per month.
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