Owning a home continues to be the ultimate dream for the average Indian. A house remains one of the primary financial goals in life. Earlier, people would prioritise building a home as soon as they started earning. Only after that would they think about buying a car. However, today, it’s often the other way around – first comes the car, then the house. This is an era where people take loans not just for major financial goals but even to buy smartphones. The reasoning is simple: just repay in monthly instalments from your income. However, amidst all this, one must not forget to set aside a specific amount every month for essential goals like buying a house, retirement, and children’s education. Despite saving diligently, achieving the dream of owning a home often falls short. You can save a portion and arrange the remaining amount through loans. For this, early preparation is key. Maintaining a high credit score is crucial, and comparing interest rates offered by different banks can help. Comparing bank interest rates Interest rates offered by banks based on repo-linked lending rates (RLLR) are detailed below. The interest rate fluctuates depending on changes in the Reserve Bank of India’s (RBI) repo rate, which currently stands at 6.50%.

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interest rates
Since 2019, banks have been offering interest rates based on the repo rate. When the interest rate is determined based on RLLR, it changes only when the RBI modifies the repo rate. This makes it more transparent compared to other benchmarks like the Marginal Cost of Funds-Based Lending Rate (MCLR). Home loans linked to the repo rate generally offer lower interest rates compared to MCLR-based loans. While MCLR rates are influenced not only by repo rate changes but also by factors such as the marginal cost of funds, operational costs, and tenor premium, RLLR rates change only with adjustments in the repo rate by the RBI. Due to this increased transparency, more people are opting for RLLR-based loans. The share of MCLR-based loans dropped from 46.5% in June 2022 to 38.5% by March this year. As repo rates decrease in the future, the share of loans based on marginal cost is likely to see a significant reduction. For a 20-year home loan at a 9% interest rate, the monthly repayment for ₹1 lakh will be ₹900. Accordingly, if you take a loan of ₹20 lakh, the monthly repayment will be ₹18,000. For a ₹40 lakh loan, it will be ₹36,000 per month.
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If the interest rate is 7%, the monthly repayment for ₹1 lakh will be ₹755. At 8%, it will be ₹836, and at 10%, it will be ₹965. For a 20-year loan of ₹20 lakh at a 9% interest rate, the total repayment amount at the end of the tenure will be ₹43,18,685. Of this, ₹23.18 lakh will be paid as interest alone.