Interest only land loan
Loan has become an inevitable part of today's life. Whenever people think of doing a purchase of a valuable, they always analyze the option of going for a Loan. Loan will help the purchaser by preventing huge cash out flow initially at one go and the amount of purchase is paid in convenient installments. Even when there is enough cash with a person, some people still prefer to go for a Loan to take the advantage of cash flow and also the competitive interest rates.
Interest on Land Loan:
Nowadays Loan on land and home is inevitable for most of the people. This is because, the cost of acquisition of a land or home is quiet huge and it will be difficult to raise the fund for out right purchase of Land or home. So people depend on Loan for purchase of Land. The main consideration while going for a Loan is the interest rate. If the interest rate is higher, the amount which the person is going to pay over a period is going to be high and if the interest is lower, the total outgo over a period is going to be low.
Type of Interest Rates:
The main feature of a Home loan or land loan is that the duration of the Loan is high and the value of the Loan amount will also be high. This is the main reason for the Bank to adopt two types of interest rates like floating rate of return and fixed rate of return.
The banks adopts different rate of return for their loans to overcome any unforeseen changes in the economic scenario in the coming years and to hedge the banks against any economic risks. Floating rate of interest is that the rate of interest will be reviews by the Banks continuously depending on the economic conditions and also on the banking regulator's instructions. Fixed rate of interest are also subject to change but the banks retain the rate of interest for a particular period like one year or 2 years. After that particular period, bank can review and change the rate of interest.
Normally, the floating rate of interest will be lower than the fixed rate of interest. This is to encourage the customers to go for a floating rate of interest and the banks will also have the option to revise the interest rates.
Deciding on the Loan:
The customer has to decide the Loan based on the total out flow of money over the duration of the Loan. Interest rate is one of the most important factors and the monthly installment amount will depend on the interest rate. The customer has to calculate the total out flow of cash during the loan tenure and decide the type of loan and the Bank which offers the Loan.
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