The interest rate on your home loan’s principal amount is the primary factor that dictates its affordability. When you repay your home loan, typically, each EMI will consist payment towards the principal and interest. So, getting a loan sanction with competitive home loan interest rates will allow you to keep your home loan cost-effective.
1. Repo Rate: The repo rate is the rate at which the RBI gives banks money. If the repo rate drops, more money is brought into circulation in the economy and as a result, the interest rate on your loan drops as well. Similarly, when the repo rate is high, the interest rate will increase correspondingly.
2. Demand for Loans: Interest rates are also dependent on demand and supply. If there is a high demand for loans, banks and other financial institutions will have lesser funds available to lend. As a result, the interest rate will be high.
3. Cash Reserve Ratio: This is the amount of money that banks have to keep with the RBI. If the CRR rises, then banks have lesser funds to lend in the form loans. As a result the interest rate rises. Similarly, if the CRR falls, banks have more to lend and they can do so at a lower rate of interest.
Apart from the above, the interest rate may also depend on factors related to you as an individual and to the lender you choose. For example, your credit score and existing debt can influence the home loan interest you are offered. Your lender could offer you lower interest rates due to seasonal offers too.
One you understand the factors that affect your home loan’s interest, take measures to pick a lender who is offering you the lowest rate. This will help you ensure that the loan that you are taking is affordable. Bajaj Finserv’s Home Loan is one such option. Apart from the nominal rate of interest, there are a host of other benefits that Bajaj Finserv offers.
Take a look at what they are.• The loan is easy to access because of its minimal eligibility and documentation requirements.
Now that you understand interest rates and the bearing that they have on your borrowing experience, time your loan correctly and choose the best home loan from the options available to you.
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