If you’re planning to buy a house, the prevailing home loan interest rate is one of the main factors that should be considered. A small change in the rate would still have a very large impact on your total interest over the repayment period. These rates are not constant and change due to changes in market conditions, policy, and borrower profiles.
Having the latest information and understanding which factors affect the interest rate you get and how helps you to make informed financial decisions.
A number of factors that are beyond the lender’s influence can affect the interest rate they offer on your home loan. When you are aware of these factors you can not only plan but also improve your loan terms and repayment.
1. RBI Repo Rate and Market Conditions: Repo rate is the interest that financial institutions pay, that’s why it influences the interest rates you get. As the repo rate changes, the banks and NBFCs also change the home loan rates accordingly.
2. Borrowers Credit Score and Profile: Your credit score and profile demonstrate whether you’re a responsible borrower and if you’ll be able to repay the loan on time. If the score is low, you may still get a loan but at a higher interest rate because the lender considers you to be a high-risk borrower. Conversely, a high credit score can help you get lower interest rates.
3. Loan Amount and Tenure: In longer loan periods and higher principal borrowing, the interest rate may be higher to off-set the risk.
4. Salaried vs Self-Employed Applicants: Given the income stability, salaried individuals are generally given a better rate whereas a self-employed borrower may get higher rates.
Knowing about the various types of interest rates for home loans is really important before you can make a comparison between lenders.
1. Fixed Interest Rates: The fixed interest rates stay the same for the loan tenure and hence ensure a consistent repayment schedule. However, if the market rate drops, you may not be able to capitalise on that and save on interest.
2. Floating Interest Rates: They are dependent on the market situation and change accordingly. So, if the rates drop you can save on interest. However, your repayment schedule will also change accordingly and you won’t have the same stability provided by fixed rates.
Comparison of Home Loan Interest Rates (Banks and NBFCs)
| Lender type | Interest Rate Range | Processing Fee | Key Highlights |
| Public Banks | 8.3%-9.0% | Low fees | Government -backed, extensive branch network |
| Private Banks | 8.5%-9.5% | Moderate | Faster approvals, tech-driven, processing |
| NBFCs | 8.25%-10.0% | Flexible | Customised loan solutions, lenient eligibility norms |
The comparison gives an approximate understanding of the market in general to the borrowers and the actual rate may vary.
Both the banks and NBFCs have their advantages.
1. Banks: Generally they are less expensive but have stricter eligibility criteria and a longer processing period.
2. NBFCs: Such institutions could price the loan a bit higher, but they are known for having less stringent eligibility criteria and quick loan delivery
However, your choice should depend on your financial goals, credit score, and the level of repayment flexibility you want.
1. Don’t just focus on the interest rate while comparing financial institutions. Look at other charges and the overall loan process to ensure you have stress-free experience.
2. Focus on lenders who have a good reputation in terms of transparency, competitive rates and consistency in service delivery rather than on lenders who only offer the lowest rates.
The reason why it is not a mere financial formality to compare home loan rates before settling on your lender is because it is a long term saving measure. Stay updated, consider all factors, and select a financial institution that would offer both affordability and reliability.
PNB Housing offers transparent processes and flexible loaning programs catering to the different borrowers’ requirements.
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