What are the different types of Interest Rates available on Home Loans?
Different institutions charge different rates but mostly in the range of 9% – 11%. The interest is calculated on annually reducing balance, monthly reducing balance or in rare cases on daily reducing cases. Annually Reducing Balance: Here the principal on which interest is calculated remains unchanged throughout a year. The principal is reduced only at the end of the year. In this system EMI is not that effective. Monthly Reducing Balance: In this system the Principal is reduced every month by the amount of EMI paid. Daily Reducing Balance: Rarely practiced, in this system the principal amount on which interest is calculated is reduced by EMI from the day EMI paid.
