Methods Used by Lenders For Determining Home Loan Interest Rates - Loan Trivia


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Thursday 18 October 2018

Methods Used by Lenders For Determining Home Loan Interest Rates

Right from the time, one applies for a loan, the term which is used almost everywhere happens to be the interest rate. This can be floating or fixed but what most people do not understand is how is the Home Loan interest determined by the lenders. The answer is there are a few parameters which are used by the lenders, a few of which are -

Cash Reserve Ratio (CRR)

This is determined by the RBI (Reserve Bank of India) and refers to the minimum reserve which every bank needs to maintain from the total deposit received from customers. Higher CRR means higher rates of interest the liquidity in the system goes down.

 Repo Rate (RR) and Reverse Repo Rate (RRR)

Repo rate is the interest rate at which the RBI lends money to other banks while RRR is the interest rate which RBI has to pay to borrow money from other banks. Higher RR results in higher interest rates but keeps the inflation under check.

Additional Read: How Lenders Decide The Home Loan Interest Rate?

Base Rate (BR)

The BR is the minimum interest rate at which banks can lend money to customers. It is determined by the RBI and was introduced in 2010.

If you are looking for a Home Loan but are worried about the interest rates, then you will be glad to know that there are many lenders available today who offer Home Loans of up to Rs. 3.5 crores at very competitive interest rates. The application process is entirely online and the documentation consists of the basic KYC documents which can be uploaded online. Additionally, there are tools for checking your eligibility and the monthly installment which ensures complete transparency.

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