Owning a home brings a sense of security and financial achievement for many. However, home loan interest rates vary across banks and lending institutions. What may seem like a small difference could end up costing you a huge differential.
India’s real-estate market is set to transform with a growing focus on affordable financing options, online loan processes, and sustainable housing. This is evident from the fact that the individual housing loan outstanding as of September 30, 2024, stood at Rs 33.53 lakh crore, marking a 14% growth from the same period in the previous year.
This growth displays how housing finance has become essential in the country. With growing demand, lenders often modify interest rates competitively. This makes comparing interest rates even more important for borrowers.
Why Comparing Home Loan Interest Rates Matters?
Trivial differences in interest rates can also put a dent on your long-term finances. For example, if Lender A charges a 8% home loan interest rate, while Lender B charges 8.5% interest rate. On a home loan of ₹70 Lakh for 20 years, a 0.5% difference can lead to a total loss of ₹5.27 Lakh.
Now, if you do compare home loan rates, you can:
- Reduce your monthly EMI.
- Lower your total interest cost.
- Pick a lender that provides loans that align well with your repayment abilities.
- Understand additional charges before finalising the loan.
Using the PNB Home loan EMI calculator, you can borrow with a smart plan and estimate monthly payments and adjust the tenure or loan amount easily.
Factors That Influence Interest Rates in India
Before selecting a suitable lender, it is insightful to understand the factors that influence interest rates in India:
1. Repo Rate Changes
The Reserve Bank of India (RBI) has the power to update the repo rate based on inflation and liquidity. Home loans, especially those linked to external benchmark rates, are affected by changes in the repo rate.
2. Credit Score
Lenders often give better rates to borrowers with a strong credit score. A higher score signals responsible repayment behaviour.
3. Loan Amount and Tenure
Large loan amounts or very long tenures may attract slightly different rate slabs. It’s always good to check the lender’s specific brackets.
4. Employment Type
Salaried individuals in reputed organisations often receive lower interest rates because of income stability. Self-employed borrowers may face a different rate structure.
5. Property Location and Value
Loan rates may vary based on the valuation of the property and market conditions in the city you’re buying in.
What You Should Compare When Choosing a Home Loan?
Many other comparison factors can affect your home loan choice. Some of them are listed below:
- Type of Rate: Choose between either a fixed, floating, or a mixed interest rate. While fixed rate options offer a fixed, predecided interest rate throughout the tenure of the loan, floating rates are linked to external benchmarks and are fluctuating during the tenure. Mixed rates offer a combination of fixed and floating.
- Processing Fees: Compare the processing fees that remain unique across lenders. Some lenders charge a flat fee; others may charge a percentage of the loan amount.
- Prepayment Charges: Check if lenders penalise you for early repayments through a ‘prepayment charge’. Generally, floating rate loans do not have a prepayment charge.
- Loan-to-Value (LTV) Ratio: Compare each lender’s loan-to-value ratio, i.e, the maximum percentage of the property value that the lender is ready to sanction.
- Disbursal Time: The loan disbursal time is also important for home buyers seeking immediate financing.
A Guide to the Home Loan Application Process
First of all, comparing across different lenders and interest rates is important. You can check the PNB Housing Finance home loan interest rates to know if the rates are favourable for you. Next, you can apply for a home loan online and offline. Here is a guide to apply for a home loan using online tools:
- Check eligibility: The first step is to check your eligibility across lenders. This can be done from their eligibility checks available online. Factors such as age, income, etc are evaluated for eligibility.
- Plan using an EMI calculator: Before proceeding, do plan your repayment schedule and monthly EMIs. For instance, you can use the PNB home loan EMI calculator to plan your repayments efficiently.
- Application form: Look for the home loan application form on the lender’s website. Fill out the form accurately, and submit.
- Submit your documents: All related documents that support your application should be submitted.
- Property evaluation: Lenders often verify and evaluate the property before approving the loan.
- Approval and agreement: Upon successful verification, your application will be approved. You also have to sign the agreement.
- Disbursal: The final step is disbursal of loan amount into your account.
Alternatively, you can physically visit the lender’s nearby branch for an offline application process.
Conclusion
Choosing the right home loan buyer is essential when buying a new home. Home loan interest rates are an important determinant when choosing the best home loan lender.
However, always consider other factors like the type of interest rate, tenure, terms, service quality, and repayment schedule. Whether you’re considering traditional banks, housing finance companies, or digital platforms, take the time to understand each lender’s terms to make a confident choice.