When you buy a home and scour through the myriad of home loan products available to you, you’ll notice that rate tables often display basic details of the product, loan tenure, interest rate and the approximate monthly EMI applicable in each case. Note that these exact rates fit a borrower in a particular circumstance, factoring in their income, credit score, loan-to-value ratio, property type/location, etc., and may not be available to someone in your particular circumstance. As opposed to the general idea, reading a rate table and knowing which product to choose is actually quite easy if you know how to interpret it.
When you compare rate tables on different sites, you may find loan products that appear similar but may be different in their processing fees and charges, policy terms, etc. In some cases, the same loan products will have different rates – this is because rates are influenced by external benchmarks like the RBI repo rate, Government of India 3-Months and 6-Months Treasury Bill yields by the Financial Benchmarks India Private Ltd (FBIL), etc. Any change in these benchmarks due to fluctuations in market conditions will affect a lender’s interest rate. The same loan product may also be available at a lower interest rate to someone opting for a shorter tenure or lesser amount.
Now that you know how these numbers may vary based on each specific case, let’s look closer into what each section in a rate table means.
Decoding the Loan Rate Table:
Bank Name: The first column would typically be the bank name. This helps you quickly narrow down the offers that appeal to you and dig deeper into those particular lender offers.
Interest Rate: Under this column, you’ll often find the lowest interest rate for that particular loan product. Now, like we’ve mentioned before, it’s important that you remember that the loan that you will be eligible for will depend on factors such as your credit score, down payment, loan amount, property type/location. Therefore, check if the site specifies the scenario for the given interest rate before you assume anything. Or you can always reach out to a Fincity expert to help you clearly understand what rate may apply in your particular scenario.
Note: A lower interest rate loan may require a higher monthly EMI payment or a higher initial down payment. Make sure to get down to the details and then choose a loan that is comfortable to repay.
Processing Fee: This is a detail that’s not always given to you on every site but is important to know. Sometimes you may come across two loan products with the same terms but one with a much higher processing fee and other charges. The processing or origination fee for your loan may go up to 1% of the loan amount borrowed. This means that in a case where you’re taking a loan of Rs. 40 lakhs, the lender’s processing fee can go up to Rs. 40,000. In case you cannot put your finger on the processing fee charged for a particular loan product, we’re always there to help you out.
EMI/Lakh: This column displays the approximate monthly EMI for every lakh borrowed. This number, too, is drawn assuming a certain scenario. In most cases, the loan tenure and other details assumed will be mentioned somewhere in the table.
Factors that May Affect Your Loan Rate
If you’re hoping to lock the loan rate you see on a site, well, it’s better to talk to the lender directly to understand the loan scenario they assumed or with a Fincity expert if you want help with negotiating a good rate. But given that everybody’s case is unique, the loan rate you will qualify for may depend of factors like:
Credit Score: The credit score is very important in deciding your loan eligibility. Some lenders do not accept applications with credit scores below 750. This score helps the lender understand your repayment history and your likelihood to repay the loan on time.
Down Payment: If the down payment is lower than 20%, meaning your Loan-to-Value (LTV) ratio (or the portion of the property cost you borrow) is higher, the lender may see this as a higher risk and charge a higher interest rate.
Debt-to-Income Ratio and Financial Obligations: There are a number of other factors like your debt-to-income ratio and financial obligations that help the lender assess your repayment capacity.
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Our objective is to get you the best loans at the lowest rates that stay low over the life of the loan – and are completely transparent in their rates, terms and fees!
No matter which lender you opt for, make sure they are transparent with every detail of the loan so you clearly know the loan cost and avoid surprises in the future.
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