Hyderabad: Interest rates, which have been low for two years, are now starting to rise. Home loan interest rates were between 6.40% and 6.80% in April. Now it has increased by almost 90 basis points. The RBI is expected to increase the repo rate further. In this context, the home loan is going to become more burdensome. In such a case what efforts should be made to get a rebate on the interest rate? Let's find out.
With the rise in inflation, the effect is also on the interest rates. You will burn a hole in your pocket if you pay high interest for long-term loans. Even if the interest rate is 25-50 basis points higher on a loan lasting 15-20 years, its impact is high. We should keep this in mind, especially while taking home loans.
Ask the lender...
Banks decide the home loan interest rates on the basis of the repo. For the repo rate, some credit spread is added to the interest rate. For example, the RBI repo rate is currently 4.90 per cent. For this, if a bank fixes a credit spread of 2.70%, the interest rate becomes 7.60%. This spread rate remains fixed for the duration of the loan tenure. Generally, it starts from 2.70 per cent and it can go up to 3.55 per cent.
In many cases, the banks reduce the interest rate by 15-20 basis points from the advertised rate and were unable to provide loans. It completely depends on the borrower's credit score and repayment schedule. Bargaining is possible in case of transfer of loan from other banks/financial institutions to a new bank.
Long-term relationship...
Banks generally try to provide as many benefits as possible to their customers. When you have transactions like salary accounts, investments and previous borrowing. You can get a loan at a slightly lower interest compared to others. Sometimes based on your relationship with the bank the loans are sanctioned in advance. In such a case, there is a possibility of providing loans at discounted interest rates.
These pre-approved loans do not require as much income and other verifications when taking personal and vehicle loans. Sometimes if more than one loan is taken in the same bank. For example, if you apply for a home and car loan in the same bank, you can get a loan at a slightly lower interest rate. Discuss this with your banker.
Also read: How to build and maintain a good credit score?
Remember these...
Banks consider where you are employed in determining the loan interest. Usually, those working in leading organisations and corporates do not have any problems in this regard. The interest rate is a bit higher for those who run their own business and freelancers. Choose a bank after doing some research.
Banks give some percentage interest concession to women borrowers. Whether they are the primary borrower or co-applicants, the interest deduction is provided. There are chances of getting some interest concession when buying a house or flat from the developers identified by the banks. Find out which bank will lend to the property you are buying. The same applies to vehicle loans.
If you have more than 800 credit score...
Those with financial discipline can get loans at low-interest rates. Banks lend high interest to those who do not make regular instalment payments. If your credit score is more than 750, banks consider you a good borrower. Don't give up on such people. Those with a score above 800 are offered loans at low-interest rates. Check your credit score before taking out a new loan. If it is below 750.. don't rush to take a new loan. Take steps towards increasing the score first.
The loan amount determines the interest rate
The amount of home loans taken determines your interest rate. For example, banks charge a low-interest rate for loans below Rs 30 lakh. Interest is high when it exceeds Rs 75 lakhs. The proportion of the home's value that is being borrowed is crucial. If this ratio is low, the interest will be subsidised. In most cases, borrowers tend to take a higher amount of loans. They think that this will save them from spending all their savings. But, don't forget that high debt can be burdensome in the long run, says Adhil Shetty, CEO of BankBazaar.com.
