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Dig out the way to reduce your home loan interest rates?

                                       WAYS To SHINK Your Home Loan

Purchasing home is a dream come true and lifetime struggle for a common man in the developing countries like India. Many nationalized and private banks have come forward stretching their helping hands by offering loans at attractive interest rates. Economic scenarios in the country compel common man to go for loans to become owner of home. Before choosing loan for purchasing your home, you need to work out on the features you need from the bank loan and home loan interest rates that you are going to incur. I am here to shed a light on types of house loan interest types rand strategy one should fallow to reduce the interest on home loan.

Banks in India today offer different types of interest rates on home loans to add convenience to customer’s basket. There are different types of home loan interest rates like fixed interest rate and floating interest rates.

Fixed interest rate    

 When you choose to go with fixed interest rate system for your home, interest rate will remain fixed for the term you choose. At the end of the term, you can either choose to go with the new one with rates available at that point of time or move on with floating interest rates for rest of the tenure. Fixed interest rates keep you assured about the amount of interest you repay for fixed period because they are not affected by any interest rate changes by the banks.  The rate of interest here is much lower than floating interest rates. Pre- closing of loan or any early extra payments will draw charges.

Floating interest rate

 As stated by the name, floating interest rate may go up and down with the effect to wider market change. As a borrower, you have flexibility to change it fixed interest rate at any point of time during the tenure. When you choose to go with floating interest home loans, you will enjoy the flexibility to  pre-close any amount of loan at any point time. However, mind that floating interest rates are little higher than the fixed ones. If the floating interest rates fall down due to market changes, you can easily repay the loan without affecting your installment. At the same time, Vice versa can crush your budget too.

Strategy applied

 If you are borrower of home loan before April 2016, you may be looking out the ways to reduce home loan interest rates with current economic changes in the country.  You might be paying higher interest rates on your loans are PLR linked. Best strategy you can apply here is to switch to MCLR. This interest rate is directly related repo -rates. In the current cycle of lower interest rates, reduced repo -rates will downward MCLR and the benefits are passed to the borrower quickly. However, one should be cautious that the opposite also holds true. However, banker may charge certain fee to convert your loan from PLR to MCLR. You should calculate the benefit that you incur with the conversion before taking the plunge.


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