Effects of Interest Rate on Your Home Loan Account

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Gaining good knowledge about the interest rate will benefit the customers in choosing a right product applicable to their need and choosing a right interest rate is the typical thing in the home loan processing also.

A customer has to be very careful before going for a home loan. The interest rate is applicable for the whole repayment period which you are opting for and it will vary when the bank changes the Base and BPLR rates according to the markets.

Compare the rates with the other banks and ask whether the interest rate is calculated on daily basis or monthly basis. Please take care of the below steps before taking a home loan.

1. Whether the rate of interest is Floating or Fixed.
2. If it is Fixed then it is fixed for the whole tenure of it can be changed.
3. If the Rate of Interest is floating then at what period of intervals' the ROI will be changed.
4. If the ROI changed then the EMI will increase or the Tenure.
5. If part payment made then how the rate changes on your account.
6. Will you be notified if any rate change occurs on your account?

Usually when a customer makes part payments in to his/her account the bank will deduct the amount paid directly from the principle and calculate the interest on the remaining amount only by keeping the EMI constant.

Banks usually increase the tenure when there is a change in the Rate of Interest (ROI). If the tenure crosses a period of 300 months then the banks increase the EMI. The floating rate is completely market dependent, and the customer should be aware of the clause in the Fixed rate that the bank can change the rate if there is any huge changes in money market conditions.

Customers are always suggested to make part payments to the loan account to reduce the interest amount that is to be paid on home loan.

Banks will different types of offers to save the interest paid on the loan account like " Home loan interest saver" in which customer needs to open a saving account with the funding bank and the interest earned on the amount deposited in the account will be reduced from your home loan interest.

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