Owning a house is a significant achievement that requires
substantial financial planning and assistance. An important aspect of this
process is understanding housing loans, particularly the interest rates
associated with these loans.
Furthermore, comparing housing loan rate of interest helps you manage the overall cost of the loan and
allows you to choose the best option that suits your financial situation. To
help you with your research, here is a list of steps that will help you compare
interest rates offered by various lenders.
Understanding Housing Loan Interest Rates
Interest Rate is essentially the amount you are paying to
the lender for borrowing the loan. These rates are influenced by various
factors such as the Reserve Bank of India’s (RBI) monetary policies, the
lender’s fees, and your credit score. Before we move on to comparing loan
interest rates, it is essential to understand the two types of interest rates.
- Fixed Rate Loans
In this type of rate, the interest rate remains the same
throughout the tenure of the loan. If you want to have predictable loan
payments, this would be an ideal option for you. However, it is important to
note that fixed rates are generally higher.
- Floating Rate Loans
Depending upon the market condition, the interest rates in
this type of rate keep fluctuating. You may have a lower payment in the
beginning, but it also has the risk of rising costs over time.
Comparing House Loan Interest Rates
Now that you have understood the types of rates and the
factors that affect these rates, let’s look into the steps to compare interest
rates provided by various lenders.
Step 1: Researching Lenders
You can start your research by making a list of potential
lenders. This includes banks, and non-banking financial institutes (NBFCs).
Note that even though NBFCs offer more flexible terms and speedy processing as
compared to traditional banks, they charge a slightly higher interest rate.
Step 2: Using Online Comparison Tools
Several websites allow you to compare housing loan interest
rates of different banks and NBFCs. Comparing interest rates is important since
you might save lakhs over the loan tenure by choosing the lower rate. The best home loan app also provides other features like swift loan approval and
disbursal and EMI calculators for budgeting.
Step 3: Checking for Additional Charges
Housing loans are often accompanied by various charges such
as processing fees (one-time fees), prepayment charges, and legal and
documentation fees. Some lenders add hefty charges while offering lower
interest rates. Thus it is necessary to consider these additional costs into
your budget.
Step 4: Looking Into the Loan Features
Your overall loan experience can be affected by various
features such as flexibility in repayment (part-prepayment without penalties),
loan tenure, customer service, and online support. Loan tenure is an important
aspect since long tenure leads to lower EMIs. However, in this case, you may
end up with higher interest payments. Comparing these features of various
lenders will help you find the right balance between affordability and cost.
Step 5: Analysing Interest Rate Trends
Current market trends greatly impact the interest rates
offered by lenders. Therefore, it would be wiser to secure a loan when the
interest rates are expected to rise.
Step 6: Finalising Your Decision
Once you have considered all the factors, start applying for
a loan by choosing a lender, preparing the necessary documentation, and
submitting the loan application.
Improving Eligibility for Lower Rates
There are a few things that would help you become eligible
for lower rates. Some of them are mentioned below.
- Credit Score: A higher score can allow you to secure a
loan at a lower interest rate.
- Loan Tenure and Amount: Larger loans have different rates
as compared to smaller ones. Also, if the tenure is less, you may get lower
interest rates.
- Income Stability: Before approving the loan amount, the
lenders assess your income stability to get an idea of your repayment capacity.
Conclusion
Comparing housing loan interest rates is an important step
for securing funds for your dream home. By understanding the different types of
rates, how they work and the steps involved in comparing interest rates, you
can avoid hidden charges. It is imperative to remember that even the slightest
difference in interest rates can result in significant savings because of long
tenures. Therefore, conducting in-depth research on interest rates is necessary
to help you make informed decisions that will benefit you in the long run.
