How to financially prepare for a home loan interest rate hike in the future

 The likelihood of further rate cuts are slim to none. Home borrowers, on the other hand, should not dismiss the possibility of interest rates rising from current levels. Because the rate transmission is now smooth, any rate hike by the RBI will be reflected promptly in their home loan rate. Any increase in house loan rates would result in a higher EMI (or loan tenure), which could throw your financial plans off.

For example, an EMI of Rs 75,739 @6.7 percent for a 20-year house loan of Rs 1 crore will be Rs 75,739. The price will rise to Rs 81,787 at 7.7% and then to Rs 88,052 at 8.7%. In this type of situation, fixed-rate loans are the best option. However, the possibilities are limited, and only a handful of them offer set prices, which are only available for a limited time. More crucially, the interest rates on these partially fixed-rate house loans are higher.

While you have no control over interest rate hikes, you can plan for them by assuming a higher rate of interest. "Assume a normal house loan rate of roughly 8.5 percent instead of the current very low rates, and invest the remaining EMI somewhere else systematically," explains Aparna Ramachandra, Founder & Director, Rectifycredit.com. For example, the EMI for a 20-year home loan of Rs 1 crore is Rs 86,782 @8.5 percent, while the EMI for a 20-year home loan of Rs 75,739 @6.7 percent is Rs 75,739 @6.7 percent. Every month, you should invest the Rs 11,043 difference in a short-term debt fund. If interest rates rise, this fund will serve as a backup. Even if the rate does not rise, you will be in a better position because this money will go into savings rather than consumption.

Conclusion

There's no need to be discouraged if your personal loan application is turned down. To boost your chances of loan approval, simply work on improving your credit report and following the methods outlined above. Once you've completed this checklist, you're ready to submit your personal loan application.To find about the best pricing and deals, call our toll-free number +91-9477079053. They'll help you in every way they can. Please contact me at Best Home Loan In India if you have any more.

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