There are many smart readers once they become curious about a topic, they immediately want to know what it means and they would have engaged in doing a small research about the topic. I am certain that my readers are also very proactive. So here I continue with the other terms and important notes you should be aware while applying for a home loan in any bank. I stopped with Levy of penal interest in the last post now let us see the rest of the terms and the clauses existing in banks.
Fixed Interest rate: A fixed interest rate remains constant throughout the loan tenure regardless of the market conditions. Borrowers are entitled only to pay the fixed interest which they opted in the beginning of the loan term. This fixed interest will not be allowed to change at any cost. The borrower takes the full liability to repay the amount with the same interest charged for him.
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Floating Interest rate: Floating interest rates are quite risky but many wanted to opt for it just because of uncertainty in it. Floating interest rate can decrease or increase depending on market fluctuations. For instance, it increases when RBI hikes up short term interest rates. Banks usually quote the floating rate loans as their index rate (prime lending rate) plus or minus x%. Banks usually increase or decrease their prime lending rate when the RBI increases or decreases short term interest rates. Sometimes it is advantageous and most of the times it’s a great downfall. Don’t know whether you are one among the luckiest one to get lower floating interest rates if at all you opt for it.
EMI calculation: I am sure most of us are clear with the term called EMI (equated monthly installment) offered by many banks, products and service sectors to enjoy the benefits. But how is it calculated when applying for a bank loan and the borrower has to plan his budget and calculate the EMI. The EMI is calculated taking into account the loan amount, the time frame for repaying the loan and the interest rate on the borrowed sum. To make it more simple go to this site to calculate your EMI by providing your total loan amount, total time frame allotted for repayment and the type of interest rate.
I am certain that from now onwards you will be more cautious while deciding on your home loans offered by banks. Though India still has a fairly modern system of administering home loans, it posts huge profits with steep growths every year. However the cost of this is borne by hapless consumers with hardly anyone to complain about it.