The home loans interest rates are on a continuous decline in recent times. However, the interest rates may increase anytime due to the fluctuations in the markets. When the Repo rate of the RBI increases, the interest rates increase, while when the RBI decreases the Repo rate, the lending interest rates also fall. Thus the fluctuations do exist in the markets in the interest rates charged to the borrowers in the markets. There are two types of repayment options available for borrowers: fixed interest rates and floating interest rates. The fixed interest rates are one in which the interest rates remain the same in case of home loans being availed. While the floating rates are the ones in which the interest rates keep changing along with the market conditions. The home loans are charged to the customers in the range of 6-9% per annum to the borrowers. Different lenders charge differently to the lenders for the home loans. Some lenders charge lower interest rates, while some others charge higher interest rates
The interest rates being charged by the lenders to the borrowers are calculated on a cumulative interest basis; thus, the repayment value is quite high for the loans being availed. In the same interest rates, the repayment value also varies depending on the tenure of the loans. The higher the tenure higher is the repayment value for the loans. At the same time, the lower the tenure lower is the repayment value of the loans. Thus availing of loans for shorter tenure is better rather than availing the long-term loans. The interest rates hike can affect the borrower if the new loans are availed or if the loans are availed on a floating interest rates basis. The loans taken on the women’s name can lead to charging lower interest rates to the borrowers rather than taking only on the male person’s name. A woman can be a joint co-owner of the loan wherein the rebate can be availed on the home loans. The lenders also set various offers in a limited duration to boost their own business, and thus in the limited period offer, banks charge lower interest rates to the borrowers. The disbursement of the loans in the discount period is higher than the normal times.
Following are the ways to deal with the future rate hikes on the loans:
Make pre-payments during the rate hikes:
The borrower can repay loans early when the individual gets a bonus, incentive, salaries, or other variable components on the salary. The excess funds received can be put into repayment of loans. The borrower can save heavily on the repayment of loans by paying a higher amount of installments and thus also cutting down on the tenure of the loans.
Switch the lender to a lower rate of interest:
If the lender is charged very high interest rates on the loans, the borrower can switch the loans to another lender and thus can avail loans at lower interest rates with another lender. Thus switching the lender is a better choice to avail loans at lower interest rates.
Do a proper survey before approving the lender for the loans:
To avoid paying higher interest rates, the lender can thus make a proper survey of the loans interest rates charged and thus should avail the loans from the lenders who charge the lowest interest rates. There are multiple websites wherein the comparative chart of the interest rates is being displayed. The lender charging the lowest interest rates & processing fees should be taken into consideration.
Avail floating interest rates rather than the fixed ones:
As the interest rates are continuously declining, the borrower should avail of loans repayment on a floating interest basis. This can benefit the borrower significantly to deal with high rates. However, if the interest rates are hiked, the borrower may be forced to pay higher. But most of the time, the interest rates may go down, and the borrower can save on higher interest repayment.
Thus, there are various strategies to deal with higher interest rates, such as paying higher installments, choosing the lower tenure, or switching to another lender. Also, taking loans on women’s names is another strategy that can significantly bring down the interest rates.