Why opting for the cheapest interest rate in a Home Loan shouldn’t be your goal?

Being the proud owner of a house is a dream everyone wants to fulfil at some point in their life. Today, a number of banks and financial institutions offer individuals a chance to make this dream come true with the help of the best home loans in India.

While availing a home loan is quite easy because of the competitive market, one has to be extremely careful when considering a housing loan plan. Many assume that availing the cheapest rate of interest is the be all and end all of a successful home loan sanction. But this is not true.

Yes, a low rate of interest does help make it easier to pay back the principal and interest amount, but a number of other factors also play and important role in determining the total interest amount that you finally pay. These factors should be considered along with the interest rate to make the most out of it.

Tenure
Lower interest rate and a shorter tenure ideally works very well for those seeking to avoid paying a high interest. In case of a longer housing loan term, one generally ends up paying more interest even if it is considerably low. Thus, tenure should definitely be considered along with interest.
Over-head charges and fees

Along with the principal and interest amount, there are certain overhead charges that have to be cleared too. This include- charges for loan processing, loan closure fee, loan transfer fee, early repayment fee, late repayment fees etc. While some banks offer lower rates, they make up for it by charging high fees. Thus, one should make sure that the overhead charges do not burn too deep a hole in the pocket.

Opting for a low interest rate should not be the only goal when looking at home loans. The credibility of the bank or the financial institution that you are considering matters as well. If one has a good relationship with a reputable bank that is offering an interest rate that is slightly high, it is always better to maintain the relationship and opt for a loan from the bank, rather than choosing a new or less reputable bank offering a lower interest rate.

All in all, when considering a home loan it is best that one takes advice from a professional and keeps in mind the above mentioned factors together with the rate of interest of the loan.