Basic Fundamentals lending Interest Rates:
To understand how banks declare their interest rates, we need to know about the basic of lending cost, what is the current cost of funds. Normally lending cost as per market is approx 9% per annum and if we add some fix cost of lending then it will go up to 11% for non banking financial companies. But banks has large benefit of in house customers having huge current account base. The average minimum account balance is greater than Rs. 10,000 and it can go up to 10 lacs for some unique account. If we talk about average bank balance of current account base where bank do not need to give a single rupee against the minimum average balance maintenance. On the basis of this knowledge, we can say, bank has their own fund for lending without paying interest rates. So the average costs of interest rates are 10%, where there is negligible expense on funds distribution against the mortgage loan & Home Loan.
Comparison between Fixed Rate & Reducing Rate:
For general awareness, there are two types of interest rates available in market from financial industries.
- Reducing interest rate
- Fixed interest rates
PSU banks, private banks, co operative banks are lending reducing interest rates. Apart from these lenders, non banking finance companies like some micro finance companies are also offering reducing interest rates. So if you want to get Property Loan or another housing loan, always prefer reducing interest rates. Actually interest amount is charged on fixed principle loan amount till the outstanding reaches to zero. On the other hand if we get a loan on reducing balance than the interest to be charged will be on remaining balance principle amount rather than whole principle outstanding amount. So whenever we inquire about interest rates always ask for reducing interest rate.
Property Mortgage Rate depends on current banks or finance company base rate and their lending rates. Mortgage Loan interest rates are available from 11.5% to 18.5% reducing basis. Loan against property is the easiest way to get instant case Loan Against Property.