What is teaser loan?

I never knew much about home loans until my father had to avail one previous year to have a house of his own. I thought there is only one type of home loan and it has the percentage of fee or interest rate and time fixed but no. I came to know that there are many rates, times, types of loans and one such is the teaser loan. It refers to any loan that offers a lower interest rate for a given period of time as a purchase incentive. 

Teaser home loans are also given by the banks to attract customers by offering them lower interest rates during the initial years and then gets shifted from fixed to floating rates or the market adjusted rates.

Teaser Rate Housing Loan

Teaser loans indeed have low interest rates and sometimes even 0%. While availing for a teaser housing loan,, one must carefully understand and go through all the documents and very much get aware of the loopholes if any. 

It is offered for a consumer loan and when the introductory rates expire, the rates differ significantly and customers can see high interest rates applied to their money that gets reflected in their monthly payments as well.

Therefore it is a good idea to avail teaser loans as the interest rates help the borrowers save huge money on interest costs but also should know what extra they need to pay after the teaser rate expires. These details must be enough to explain to you what are teaser loans. 

My father discussed which loan would be the best both with his friends and bank officials. If you want to avail a teaser loan, do have a talk with the bank officials forehand and then only apply for it. 

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A teaser loan is a loan offer that has teaser rate of interest as an introductory offer, i.e. lower interest rate to tap a broader market of consumers. A teaser loan is a promotional offer usually applicable on credit cards, adjustable mortgage rates, teaser home loan, etc.

Teaser loan rates are charged by banks on their own discretion. Banks usually attract customers by offering them lower interest rates in the initial years of loan tenure. The initial rate of interest can be as low as 0%. However, in real estate, banks usually offer lower interest rates such as 5%-6% instead of usual 8%-9%.

Before opting for a teaser loan, the borrowers must keep a few things in mind. Teaser loans although save money and interest cost in the initial stages of the loan tenure, however, such offers may land borrowers in a soup when they opt for more credit than they are able to repay.

RBI disapproves of the teaser loan offers, they have suggested that there must be higher provisioning for such loans as there are higher risks involved.