Loans seem to be an ultimate solution when we are trapped in a financial crisis. When-ever we need huge amount of money, loans appear to be the safest mode of getting money. There are various banks which provide loans for all the possible reasons that includes, Home loans, Education loans, Car loans, Personal loans and others. These days home loans are quite popular among the borrowers as property rates have increased. The popularity of this loan can be calculated with the fact that despite increasing price of property, borrowers are looking for home loans. Before opting for home loan, one must gain knowledge about the interest rates provided by different public sector banks. The interest rate is the most important parameter for deciding upon home loans.
The interest on housing loans in India is generally calculated either on monthly reducing or yearly reducing balance basis. But most of the HFC (Housing Finance Company) works on yearly reducing-balance method, which accounts only at the end of their financial year for your principle repayment. So, you pay current home loan interest rates for the principal amount that you have already returned to the HFC. It makes effective interest rate higher than the quoted interest rate by around 0.7%. On the other hand, many Banks follow the daily or monthly reducing-balance method. This results in reducing the principal on which you pay interest every month as you pay your EMI. Moreover, you get two types of interest rates for housing finance in India. They are Fixed rate and Floating rate interest. Under fixed rate of interest you get the advantage of the interest rates that remain unchanged for the entire duration the loan. This means that you do not get the benefit of lower interest rate even if the rates of interest drop in the market. While the ‘floating rate interest’ fluctuates according to the market lending rate, thus proving as an advantage to borrowers. So, I definitely suggest to go for comparison of current home loan interest rates before opting for home loans. There are various Websites that promise to provide best loan comparison in India.
Posted by jolly001 