The home loans are usually charged interest rates of 6-9% per annum to the borrower. However, some lenders may charge interest rates higher than 9% per annum. The loans thus availed are available for a tenure of 30 years maximum, while the actual eligibility of the loan’s tenure may vary according to the borrower’s age. The interest rates on home loans are on a continuous decline due to a fall in the RBI repo rate. The bank charges a penalty to the borrower on the installments if the payment is delayed beyond the due date. The bank allows the borrower to pay the installments as floating interest rates or fixed interest rates. The credit ratings of the borrower should be good or excellent in case of the approval of loans. Some lenders may approve the loan even in low credit scores by charging higher interest rates to the borrower. The borrower can avail up to 80% of the property value as a loan, while the 20% at least should be made as a down payment for the purchase of the property. The bank can approve the home loan for a new construction property and also resale property.
The interest rates vary according to the lender to lender. The public sector banks & the private banks charge lower interest rates than the co-operative credit society banks or NBFC’s. The banks are keen to provide home loans to borrowers. Still, they are particular about the documentation process and the credit score of an individual, and the employment and salary proof of an individual. The co-operative banks & the NBFC’s are a bit lenient in the documentation process and also the credit score of an individual to provide un-secured home loans to an individual. In contrast, the public sector banks and the private banks have a very rigid criterion about the disbursement of home loans to an individual. The women borrowers get special discounted rates from the bank related to the interest rates being charged to encourage them to avail loans and buy properties on their own. A rebate of 0.50% interest rates is being provided to the women borrowers. For example, if the interest rates are charged 8.75%, then the women borrower’s interest rate of 8.25% is charged. As the interest rates are calculated on a compound basis, it makes a major difference on even the minor discount being given on the interest rates to the bank.
Following are the ways to reduce the interest rates on home loans:
- Do a thorough survey on the interest rates being charged:
The interest rates being charged are mentioned on the website of banks. There are various portals on which the home loans interest rates are being mentioned. Thus the applicant, before applying for the loans, should do a thorough survey of the interest rates being charged by the lenders and accordingly should avail the loans from the lender which charges the lowest interest rates.
- Negotiate the interest rates with the lender:
As the market for home loans is fiercely competitive, banks are keen to provide home loans to borrowers. The banks expect that the borrower should have a good credit score. In the case of good credit, score banks may approve the loans of the borrower at lower interest rates. Even a minor negotiation can make a big change in the amount payable to the bank as interest rate as the interest rates are calculated on a cumulative basis.
- Avail loans along with the joint co-owner as women:
Adding a joint name in case of a home loan of a women partner can help reduce the interest rates on the loans. Women as a single owner or else joint owner can help reduce interest rates of 0.50% to the borrower. Thus wife should be made as a co-owner in the home loan to avail loans at lower interest rates.
To conclude, Opting for home loans on lower interest rates is a smarter way of availing loans. A thorough survey of the interest rates being charged helps borrowers avail loans from the right lender at lower interest rates. Also, when the credit score is good, the borrower can negotiate the interest rates being charged. And women borrowers are charged with lower interest rates. Thus opting for the loan in women’s name becomes a win-win situation for the borrower and the lender.
