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Loan Interest Rates
Interest Rates for Home Loans are undoubtedly the most important
parameter to factor into your calculations. And in most cases
is the decisive factor for an investor to narrow down on a
certain Housing
Finance Company's home loan offer. The interest on housing
loans in India is usually calculated either on monthly reducing
or yearly reducing balance basis.
Comparative Chart on Home Loan Interest Rates
|
Financial Institutions
|
Tenure (in years) |
Rate of Interest Fixed |
Rate of InterestFloating |
Processing Charges |
| State Bank of India |
Up to 5 years |
12.25% |
10.75% |
0.50% of loan amount |
| 5-20 years |
12.25 % |
11.25 % |
- |
| ICICI |
0-20 years |
10.5% |
9.5% |
1% of loan amount |
| LIC Housing Finance Ltd. |
0-20 years |
10.5%- 11% |
9.5% |
0.5 per cent of the amount (max. Rs. 5000) |
| HDFC |
0-20 years |
13.25% |
11.25% |
1% of the loan amount +applicable service taxes and cess) |
| HSBC |
0-20 years |
10.75% |
- |
1% of loan amount |
| Citibank |
0-20 years |
9.75% |
9.00% |
1% of loan amount |
| Canara Bank |
Up to 5 years |
10.75% |
- |
- |
| Above 5 yrs up to 10 yrs |
11.00% |
- |
- |
| Standard Chartered Bank |
0-20 years |
10.5% |
9.25% |
1.25 % of loan amount |
| Canfin Homes Ltd |
0-20 years |
9.25%-12% |
- |
- |
| IndusInd Bank |
0-20 years |
10.5 % (for <20 lakhs)
13% (for >20 lakhs) |
9.25 % (for <20 lakhs) 12% (for >20 lakhs) |
1.25% of loan amount |
| Saraswat Bank |
0-20 years |
11 |
10 |
- |
| HUDCO |
0-20 years |
10 % (< 10 lacs)
10.5% (>10 lacs) |
9% (< 10 lacs)
9.5% (>10 lacs) |
0.5 % of loan amount
(Max. Rs.250) |
Most HFCs follow the yearly reducing-balance method, which
accounts for your principal repayments only at the end of
their financial year. Thus, you pay interest on the principal
that you have already returned to the HFC. The effective interest
rate is thus higher than the quoted interest rate by around
0.7%. Banks and some HFCs, on the other hand follow the daily
or monthly reducing-balance method, by which the principal
on which you pay interest reduces every month as you pay your
EMI resulting in a lower interest burden. Thereby, the EMI
for the monthly reducing system is effectively lesser than
the yearly reducing system of calculating interest.
Moreover, there are two kinds of interest rates for housing
finance in India - Fixed rate and Floating rate interests.
Some HFC's have fixed rate of interest which means that the
interest rates remain unchanged for the entire duration the
loan. This basically means that you do not benefit, even if
the rates of interest drop in the market while the floating
rate interest fluctuates according to the market lending rate.
The interest rates may vary from institutions to institutions
and generally range from about 12.5% to around 16%. Repayment
is in the form of EMI's (equated monthly installments) so,
longer the tenure, the more you pay in interest, but your
monthly payment will be less. Generally, the maximum tenure
of home loans is 15 years, with a few lenders offering tenure
of 20 years or more (ICICI
has recently launched a 30 year loan). The longer the tenure,
more you pay in total interest, but your monthly payments
will be less. So depending on your earning potential and bank
balance, you can choose an appropriate tenure. An important
requirement of most banks/HFCs is that you pay up the entire
loan before you retire.
The Housing Finance Companies and the Banks have variable
interest rates depending upon the tenure and types of home
loans. Though interest rates for housing finance are not
very volatile, one may well be advised to look out for indication
of any rate increases or decreases prior to finalizing the
timing and amount of loan.
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