Home loan is one of the biggest financial decisions. It cannot be taken just randomly and without knowing all the pros and cons. One has to be sure about whether this will be a good decision, in the sense of if one will be able to put off all the installments on time or not.
Owning a house which they can make their home is what makes people opt for a home loan. But what is the first thing that they look for while looking for a home loan? They look for the lowest interest rates. Always choose a home loan with interest rates which is meeting your financial requirements.
With so many options to look out for and all the banks giving lucrative offers, it is difficult to understand which one you should go for. Go for that one that you should not regret later on.
Types of Interest Provided On Home Loans
Apart from the interest rate, there are other criteria’s to look for like loan eligibility, interest rate, required documents, and EMI. There are two types of interest rates that are provided by the banks in home loans.
- Fixed Interest Rate Home Loan
- Floating Interest Rate Home Loan
Fixed Interest Rate Home Loan
Fixed interest rate home loan ensures that you pay a set number of installments equally during the entire loan tenure. This means that the interest rate stays same no matter if the property rates fluctuate.
Regularly scheduled installments made amid the underlying phases of home loan reimbursement is utilized to pay out the intrigue and when installments are made in the later phases of the month to month reimbursement of the loan, the important is overhauled.
Pros of a Fixed Interest Rate Home Loan
- A fixed interest gives a sense of relief. A sense of stability is felt when you know that a fixed amount is to go as an installment despite any market fluctuations.
- If you are strict enough with your monthly budget, then choosing a home loan with a fixed interest rate is an advantage.
- Less future risks are taken as it ensures financial security.
Floating Interest Rate Home Loan
A floating interest rate home loan varies with the market price. In the event that you choose a home loan with a floating interest rate, it implies that you will be subjected to a base rate and a floating component will be included. This implies if the base rate changes, the floating rate will likewise shift.
What works for one individual may not really be the best decision for you. In the event that you like to prepare with regards to your accounts and not leave anything to risk.
Pros of a Floating Interest Rate Home Loan
- A floating interest rate home loan is comparatively cheaper than the fixed interest rate home loan.
- Market fluctuations don’t stay for too long; there can be chances that you pay less interest according to rate.
- A floating interest rate enables borrowers to save money on the reimbursement sum
Now, you know about a floating interest rate home loan and fixed interest rate home loan. Choose wisely according to your needs.