What is The Interest Rate on Home Loans?

What is The Interest Rate on Home Loans?

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.

What is the Home Loan Interest Rate?

In a nutshell, the interest rate is the cost of borrowing funds. It is levied on an annual basis over the total sum that you take as a loan. It is important to know that interest rates are of two types: fixed and floating. A fixed interest rate is one that remains constant throughout the tenor of your home loan. On the other hand, floating interest rate is one that changes from time to time. This means that if there is a rise in interest rate, your loan’s interest rate will rise too. But, it also means that if there is a drop in the interest rate, you will get this benefit in the form of lower EMIs.While each has its own pros and cons, it is important that you choose one based on what suits your situation best.

What are The Factors that Influence Home Loan Interest Rates?

What is the current interest rate on a home loan is actually a culmination of several factors, such as the ones listed below.

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.
• It has a simple application process that you can complete in a matter of minutes.
• You can manage your loan and view its statements as per your convenience via a secure customer portal.
• You can make part prepayments or foreclose the loan without paying any extra charge.
• The Flexi Hybrid Home Loan allows you to enjoy a principal holiday of up to 4 years. With it, you can simply pay interest as your EMI for the first 4 years and use the time to plan and save for future repayment.
• You can also avail a 3 EMI holiday to make repayment smooth or a top up loan to meet any additional need for funds.
• The property dossier and property search services that Bajaj Finserv offers help you select the right home as per your budget, and guide you through the technical aspects of home buying.

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.