Home loans are secured credits and are an ideal way to fund the purchase or renovation of your house. These loans come with additional funding options in the form of top-up loan facilities that have no end-usage restrictions and hence, can be used to fund diverse expenses.
These advances also have some fees that are charged on top of the amount as interest on the loan. You also get to enjoy home loan interest factors that influence your home loan interest rates tax benefit under section 24b of the Income Tax Act. To avail a low home loan interest, you should keep in mind some factors that affect your loan rates. Such factors are discussed below.
- Credit Score
While you avail a loan, your lender will check your credit score and credit history to judge your eligibility of managing credits. The standard credit score that is required is 750 and above.
A good credit score will help you enjoy low home loan interest rates in India. Also, your credit score can determine your home loan EMIs and tenure. Thus, you must maintain a good credit score. Paying your dues on time and debt consolidation are some ways you can maintain your credit score.
- The Marginal Cost of Funds Based Lending Rate or MCLR
MCLR is the benchmarked interest rate below which no lenders are allowed to provide credit. The lending rate offered by NBFCs depends on the MCLR, which, in turn, depends on the repo rate published by the RBI. Thus, a difference in the MCLR would ensure a change in your home loan interest rates in India.
- Type of Interest Rate
While you avail a loan, your lender lets you choose from two different interest rates- floating interest rate and fixed interest rate. If you avail a loan at a fixed interest rate, your interest rate will remain constant throughout the tenure irrespective of the change in MCLR. Whereas, if you avail at a floating interest rate, your interest rate may reduce when there is a drop in the MCLR.
- Loan Tenure and EMI Amount
The loan tenure and EMI amount will also influence the rate of your housing loan. An extended tenure results in reduced monthly installments that lessen the stress on your monthly budget. On the other hand, opting for shorter tenure ensures a faster repayment, which is the best option in case you have a substantial cash flow.
You can also opt to go for accurate house EMI calculators that you can utilize to check your EMI amount and decide on your tenure accordingly. While this helps you have planned financial structures to ease the repayment, other financial tools like the eligibility calculator help you calculate your home loan eligibility with ease. All that you need to do is provide a few essential details to get an accurate idea about the loan amount that you are eligible for.
You can also choose to pre-pay or part-pay your outstanding dues if you have an adequate amount in hand. Pre-paying or part-paying your loan amount will help reduce the rate of interest on the outstanding amount. Before you decide to pre-pay your loan, make sure to enquire about the charges that your lender may apply on such actions.
Several financial institutions and NBFCs provide credits at minimal pre-payment charges. They also offer
- Balance transfer facilities,
- Top-up loans, faster approval,
- Online account access,
- Flexible tenure,
- Loan amount up to Rs. 5 Crore
Additionally, other specific factors that affect your home loan interest rate in India are your age, financial stability, occupation, loan amount, etc. Therefore, before you apply for such loans compare lenders and settle upon one that offers you the least rate of interest to avail a lower cost of credit.