Find the cheapest loan

The next time you need to compare interest costs on housing loans to finance property that you have already identified, browse this section of AbodeIndia.com. Based on your earning capacity and profile, the site will suggest a list of companies offering the cheapest loan. You must remember that interest cost increases with the loan amount and very often with increasing tenure of the loan as well.

AbodesIndia.com takes you through three stages to help you locate the cheapest loan option:

STAGE 1: Screen your personal profile to tell you which companies will accept your loan application and give you an indicative interest rate quote standardised to a monthly rest basis. This helps you compare rates across companies that quote on an annual, monthly or daily rest basis.( The differences can be quite stark for loans for smaller periods of time)

STAGE 2: Calculate the Effective Cost – including processing, administrative, interest tax and other costs.

STAGE 3: Calculate the post tax cost in each case using the Tax Planning Tool. You may get a bigger tax break with some companies and this can change the Total Post Tax Effective Cost (TPTEC) which is the only thing you must be concerned with.

 The site gives you a facility to contact the companies directly or send them an E-mail expressing interest in their products.

Some common misconceptions :

1."I just need to compare the EMI amounts the companies quote, to find the cheapest loan."

This can be a BIG mistake as you have ignore "hidden costs" like the following:

Processing fee: a one-time charge at the time you make the initial application

Administrative fee: a one time fee at the time of loan disbursement

Pre payment charges: a one time cost for repaying the loan before its term

Interest tax : addition tax passed on to the customer on interest payments.

If these costs are build in using a Discounted Cash Flow model, the Effective Cost of the loan increases by 0.25%-0.5% . Further, the government has given you tax breaks that reduce you interest cost. If chosen well a loan at 14% can actually cost only 10% after taxes. (the Tax Planning Tool helps you do this!)

2. "As the EMI is lower for loans that are over a longer period, they are better than shorter period loans"

This is far from true. The fallacy arises as EMI amounts were used to compare the cost of the loans. In reality, most companies charge you a higher interest rate for a loan of longer tenure (especially over 15 years). Though you pay a lower EMI, you are doing this over a longer period, thus increasing you loan costs.
 
 

                                                                        Find the cheapest loan