Looking for “which interest rate home loan plan is best, which interest rate plan is best to choose among different interest rate home loan plan ? Bank offers three type of Interest Plan for people taking home loan from banks. These three type of interest plans are – Fixed Interest Home Loan Plan, Floating Interest Home Loan Plan, Flexi Interest Home Loan Plan. If you are going to take Home loan then this article may be very useful for you. It will help you to decide which plan will be good for you among these three home loan plans.
Which plan to choose among fixed, floating or hybrid interest rate home loan plan :
I. Fixed Home Loan Plan :
As the name suggest, in this home loan plan you are charged with fixed rate of interest. It mean you get home loan at a fixed rate. If there is any fluctuation in the market or there is change in interest rate by cut in repo rate by RBI then bank can not change the rate of interest rate on your home loan. And there will not be any change in Loan EMI.
Pros and Cons of Fixed Home Loan Plans :
Pros : The biggest benefit of fixed home loan plan is that you will remain unaffected with any increase or decrease in interest rates in future. If interest rate increases in future, your EMI will not change.
Cons : you will not get the benefit of any cut in interest rate in future.
It should be noted that bank charge interest rate 1 or 2 percent more in fixed home loan plan. Banks do this by keeping in view the increase in interest rate in future.
One more important to note here is that if you are availing home loan at fixed rate then one important point to note here is that banks do not give home loan at fixed ROI for complete tenure. Fixed rate is only for some year after that bank convert it into floating rate of interest.
So before taking home loan , know in details about for how much years the loan will be at fixed ROI. Sometime it happens that banks give HL at fixed ROI but put a clause that if in upcoming months there is increase in interest rate from a certain level then remaining amount of loan will be charged at floating ROI.
II. Floating Home Loan Plans :
In floating home loan plan, interest rate is linked with base rate of the bank. If there is any change in base rate , interest rate on home loan fluctuates.
Pros and Cons of Floating Home Loan Plan :
Pros : In floating home loan plan interest rate is less in comparison to fixed. So EMI is also less in comparison with fixed rate plan.
Cons : If RBI increase Repo rate the bank also increase the interest rates. You will have to pay more EMI on home loan taken at floating rate.
Select the Scheme seeing the Inflation :
When inflation is higher than the central bank’s estimate. Then interest rates of banks are greater. Similarly interest on lower inflation are low. If interest rates are expected to increase then do not go for floating rate plan.
III. Flexi or Hybrid Interest rate Home Loan Plan :
Flexi home loan plan is hybrid version of floating and fixed rate plan. In this facility is given that the customer can change the plan to fixed or floating plan in middle as per need. The plan offers loan at fixed rate of interest for until few years. After that it becomes floating.
Benefits of Flexi Home Loan Plan :
When you choose hybrid home loan plan , you choose both for fixed and floating option. So if interest rate increase in future, your EMI will not be affected.
You can switch to fixed rate plan in case of increase in interest rates. If interest rate decrease, you can switch to floating rate plan and take benefits of low interest rates.
But it should be noted that facility to change the interest rate plan is available only one time during whole loan period.