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Factors To Keep In Mind When Selecting Home Loan Interest Rates

By Author: Aishwarya Mahurkar
Total Articles: 291

When applying for a home loan there are a number of factors one needs to keep in mind. One of factors one needs to keep in mind. Opting for a home loan is not a cheap option. The tenure of the loan, the loan amount being applied for as well as the home loan rates must be chosen carefully. In most cases the principal loan amount is decided by the financial institution themselves. The loan amount is decided keeping in mind the applicant’s income, monthly expenses as well as their credit score. One of the most important decisions an applicant has to make is deciding what type of home loan rate to select. The factors that one needs to keep in mind when selecting the housing loan interest rates:


The first factor that an individual must keep in mind when selecting home loan interest rates in India is the planning required. In any type of a home loan, the applicant will be required to plan his finances in advance to ensure that he is able to repay the loan amount. The type of planning differs when choosing either of the two types of housing loan interest rates. In the case of fixed interest, the EMIs charged each month remain fixed as well. This makes it easy for the applicant to create a fund in advance to repay the loan on time. In the case of floating interest however, the interest rate changes each month. This requires the applicant to pay more attention and plan keep a reserve for the fluctuating interest. This helps ensure that the EMI is repaid even in months where the interest is high.

Risk factor

The risk factor varies in the case of floating and fixed interest rate. In the case of fixed interest rate, the risk lies in the fact that sometimes the floating interest rate might be lower than that of the fixed rate. In such cases the applicant may tend to spend more than others on a monthly EMI. In the case of floating interest there exists a higher risk. Since the interest rate is subject to change based on the market rates, one may have to pay a higher EMI amount on months where the interest is high.


When applying for a fixed interest rate, opting for prepayment option at some point may prove to be expensive option. Applicants with a fixed interest rate when prepaying their loan amounts may have to pay a penalty too charged by the financial institution. In the case of floating interest, one is not charged with a penalty for prepaying their loans.

Author Bio :

The author is a seasonal writer on topics of finance and the housing loans sector. Through her writing, she articulates aspects that are important to people availing facility such as housing loan interest rates, documents, home loan eligibility criteria that help to make the best decision.

Total Views: 76Word Count: 483See All articles From Author

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