A home loan is a secured loan that individuals can acquire from banks or financial institutions to finance the purchase or construction of a house. The loan is secured against the property being purchased, which serves as collateral, and the borrower is required to repay the loan amount in EMIs (Equated Monthly Installments) over a specific period, typically ranging from 25 to 30 years.

Due to the fact that home loans are secured loans, with the property being financed acting as collateral, they typically have lower interest rates compared to other types of loans. As the property reduces the lender’s risk, they can offer lower home loan interest rates to borrowers. The rate at which the borrower is charged for the home loan is referred to as the home loan interest rate, and it can be either fixed, floating or hybrid.

Fixed Interest Rates

Fixed interest rate home loans maintain the same interest rate throughout the loan tenure resulting in a consistent EMI for borrowers. They are advantageous for those who prefer to plan their finances and ensure consistency in EMI payments. 

Floating Interest Rates

With a floating interest rate home loan, the interest rate varies according to market conditions. Consequently, the monthly EMI of the borrower may change depending on the fluctuations in the interest rate.

Hybrid Interest Rates

A hybrid interest rate home loan initially features a fixed interest rate for a certain period, following which it converts to a floating interest rate.

What Are the Eligibility Criteria for a Home Loan?

While the eligibility requirements for a home loan in India may differ based on a lender’s policies, several criteria must be met. Some of the fundamental eligibility criteria for a home loan in India include:

• While the minimum age requirement for a borrower to be eligible for a home loan in India is 18 years, the maximum age limit may vary across lenders, but it is commonly around 60 years.
• Lenders consider the borrower’s monthly income as one of the crucial factors when they evaluate a home loan application.
• Having a good credit score is essential to be eligible for a home loan, with the minimum required score usually set at 750. However, some lenders may require a higher credit score.
• A stable job or business with a consistent income source is necessary for a borrower to be eligible for a home loan. Typically, lenders prefer borrowers who have been in the same profession or business for at least three years.

What Is Statutory Liquidity Ratio?

Statutory Liquidity Ratio (SLR) is a mandatory requirement imposed by the Reserve Bank of India (RBI) on banks and financial institutions in India. This regulation stipulates that banks must maintain a specific percentage of their Net Demand and Time Liabilities (NDTL) in the form of specified liquid assets, including government securities, gold, and cash. The SLR is a vital tool for the RBI to maintain financial stability in the country by regulating the money supply in the economy and controlling inflation.

Adjusting the SLR percentage is one way the RBI can regulate the money supply. Higher SLR requirements reduce the amount of funds available for lending by banks, which can result in higher interest rates and lower credit growth. On the other hand, lower SLR requirements can increase the amount of funds available for lending, resulting in lower interest rates and higher credit growth. Currently, the SLR requirement for banks in India is 18%. However, the RBI has the power to change this requirement periodically based on the prevailing economic conditions in the country.

Overall, the SLR requirement is a crucial tool in maintaining financial stability in India. It ensures that banks have enough liquidity to meet their financial obligations and prevents the expansion of credit in the economy beyond a certain limit. By regulating the money supply, the RBI can keep inflation under control and ensure that the economy functions smoothly.