Banks offering home loans below 7% interest rate for self-employed borrowers

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Lenders like banks, NBFCs and housing finance companies have created home loan solutions that are specifically customised to cater to the needs of self-employed people.

Just like for salaried home loan borrowers, self-employed borrowers should also compare and shop around for the best interest rate for their home loan. Banks’ interest rates on house loans are now tied to an external standard. This is because, with effect from October 1, 2019, the Reserve Bank of India (RBI) has mandated all scheduled commercial banks (excluding regional rural banks), local area banks, and small financing banks to link interest rates on retail and MSME loans to an external benchmark rate.

The RBI has asked banks to link their retail lending interest rates to any of the following external benchmarks, according to the circular:

  • RBI’s repo rate
  • Government of India 3-months Treasury bill yield published by Financial Benchmarks India Pvt. Ltd. (FBIL)
  • Government of India 6-months Treasury bill yield published by FBIL
  • Any other benchmark market interest rate published by the FBIL

The repo rate of the Reserve Bank of India has been designated as the external benchmark by the vast majority of banks. Repo Rate Tied Lending Rate refers to the lending interest rate that is linked to the repo rate (RLLR). The RLLR is made up of the repo rate of the RBI plus a spread or margin.

The repo rate plus the bank’s margin equals the RLLR. Every two months, the Central Bank evaluates the repo rate.

The bank’s margin will stay the same for all home loan applicants, but banks are authorised to charge borrowers a risk premium under the RBI circular. The risk premium imposed by the bank is determined by how dangerous your bank considers you to be, and so varies from borrower to borrower.

Here are home loan interest rates offered by top banks for self-employed individuals:

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