As you know that home loan is the kind of loan which is taken by almost everyone who is planning to buy a home because buying home is not an easy task and more so when we consider the cost involved. There are number of loans given to buy home with different terms and conditions. These loans come with different formalities and interest rates. You cannot judge whether a home loan is costly or not by just by looking at the interest rate charged on the loan amount. There are many more things which put an impact on the cost of loan.
However, of all the other factors it is the interest rate on the loans which matter the most to the people and people often look for ways to get that down. Here are some points which can help you to understand about the factors which affect interest rate of the loan amount.
1) The most important among all is the credit score
2) Your income is also considered while determining interest rate to be charged from you
3) Your debt to income ratio
4) The amount which you are taking as loan
5) The total duration of the loan
6) Your choice of floating interest rate or fixed interest rate
7) The funds available in the market
8) Inflation rate
9) The fiscal policies and the prevailing market conditions
Here are things which you can do to get inexpensive loan:
1) Take a fixed rate loan: It is suggested that a person should take a fixed rate loan because in case of floating rate there is no guarantee of monthly installment which you have to repay the loan amount. In case of floating interest rate, a person is not sure about the amount which they have to pay because the interest rate charged on the loan amount keep changing according to the market conditions. Sometimes they have to pay high amount of interest rate and sometime low amount. And in case of fixed interest rate loan there is no such thing because the interest rate remains the same even if the market condition go up or down. A borrower will get one amount which he has to pay each month to repay the loan amount. This is the best loan because a borrower can easily manage their finances accordingly and can smoothly pay off the bad credit installment loans amount if he doesn’t face any kind of financial hardship.
2) Compare before you make a choice: There are thousands of lenders dealing with home loans. Different lenders have different terms and condition. Even all lenders charge different interest rate on the loan amount so you have to work a little hard to find the cheapest loan available for you in the market. All you have to do is take a quote from the lenders for the interest rate which is being charged by them and the cost incurred in the processing of loan. Once you get all the information related to this, then you can easily compare as to which lender is charging you less interest rate and less processing cost.
3) Put down more as down payment: Even the down payment makes a huge difference in the interest rate. There are some minimum requirements of down payment by the lender which you have to make but it is better if you make as higher down payment so that you have to take less amount of loan and the interest rate charged will also be less.
4) Don’t go for extended tenure: It is also advised that a borrower should not take unnecessary long tenure loans because as long the loan will go, the higher interest amount you have to pay and if the tenure of your home loan will be low then you will have to pay less interest amount. So calculate beforehand that what is the amount you are required to take as loan and then look that what is the maximum amount of monthly installment you can pay to clear your loan. It is only then that you should decide the tenure of loan so that within a fixed time you will be debt free.