1. |
More than
the types of loans available, what is imperative
is to see the quantum of interest and the way the
interest is being calculated. There are number of
existing attractive options available : |
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a. |
The most common
option is a fixed rate of interest for the
entire tenure of the loan. However, there
we would like to point out that you should
examine the documentation very clearly and
carefully because a number of them called
fixed rate of interest loans also have the
clause whereby the tender can increase the
rate of interest or the tenure of the loan
at his discretion. Sometimes while the EMI
that you pay is kept unchanged, the tenure
of the loan is extended by the loan provider.
Effectively, over the life of the loan you
end up paying more by way of interest. |
b. |
Another common
structure is the floating rate of interest
whereby the rate of interest for applicable
to your loan linked to a published rate of
interest. Typically all loan providers’
currently offer a lower rate of interest for
flexible or floating rate of interests as
compared to fixed rate of interest. |
c. |
A number of
loan providers offer a very interesting and
useful facility for people who expect their
salaries to go up after the first few years.
Under this scheme, a lower EMI with and /
or a lower rate of interest is charged with
a first few months followed by a higher EMI
and / or with a higher rate of interest. Using
our interest rate calculator, you can find
out the effective rate of interest being charged
and determine where the facility of lower
EMIs in the initial period is well worth paying
a marginally higher interest rate over the
tenure of the loan taken. |
|
|
a. |
In addition
to the interest rate as stipulated by the
loan provider, normally you would call upon
to take some other charges. These charges
should also be taken into account while calculating
the effective cost of the loan and our rate
calculators enables you to do that. |
b. |
Interest rates
are charged by loan providers on differing
basis. Some loan providers charge an interest
rate on a yearly reducing basis. In this case,
the principal amount of which interest is
charged is reduced by the end of the year.
However, during the course of the year as
and when you pay your equated monthly instalments,
you also repay part of the principal. In effect,
you are paying interest on the principally
amount that you have already repaid to the
loan provider. This tends to increase the
cost of your loan. Most loan providers charge
interest on monthly reducing basis. In this
case, whenever the EMI is collected by the
loan provider the principal amount of which
interest is charged also stands reduced for
the subsequent period. There are some loan
providers that reduce principal on daily reducing
basis also. This system is obviously the most
cost effective. |
c. |
Based on the
EMI your loan provider has indicated to you
(irrespective of the system being followed
as mentioned hereinabove) as also the tenure,
loan amount and other charges indicated, you
can calculate the effective rate of interest
using our rate finder. |
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3. |
In today’s
comparative market a number of loan providers are
offering additional facilities to customers. Before
finalising the provider, you should examine the
additional facilities being provided, which could
take the form of discounts, free accident protection
insurance, waiver of processing fee, waiver of late
payment penalty, etc. Most leading institutions
are willing to sanction a loan without having a
property being identified by you. Thus, you can
simultaneously search for a property and request
the institution to process your papers for a sanction
of a loan. This would help you save time and needless
anxiety at a later date. However, the disbursal
would happen only after the property stands identified
and approved by the institution concerned. |
