Look beyond interest rate & calculate your actual outgo while evaluating different loan offers. Loans involve other variables which can potentially make a low interest loan work out to be more expensive.
Evaluate the interest calculation method
Flat interest rates are low, but are calculated on the total loan amount, throughout the tenure. But reducing interest rates are calculated on the reducing outstanding balance & usually work out to be cheaper.
Floating rates mayn’t be the best choice
Banks alter floating interest rates based on changes in the MCLR (Marginal Cost-Based Lending Rate), which in turn is dependent on market fluctuations. Hence, a low floating interest rate right now can turn out to be more expensive in the future.
Check the pre-payment fees
The bank or financial institution might charge you a pre-payment fees if you choose to pre-pay a part of your outstanding loan amount. This fees might be more in case of a low interest loan. So, verify this before finalizing anything.
Check the foreclosure fees
Just like pre-payment fees, the bank or financial institution might charge you foreclosure fees if
you choose to close your entire loan ahead of schedule. This fees can prove to be more in low interest loans. So, check this as well.