There are several factors that are important for a loan seeker to know before applying for a loan from a financial institution like a bank. (Representational Image)
Taking a loan is the most obvious option for those who cannot afford to put together a substantial portion of the cost of the property.
These are some important things to know before taking a home loan in India. It is advised to do proper research and select the lender who offers the best terms and conditions. Owning a home is considered a life event for many people. Optimizing the resources to do so is another challenge for those who do not have an amount that would help them buy a home in one go.
Taking a loan is the most obvious option for those who cannot afford to put together a substantial portion of the cost of the property.
Home loans offered by financial institutions facilitate the transaction and help people buy homes without compromising on their basic financial needs.
There are several factors that are important for a loan seeker to know before applying for a loan from a financial institution like a bank.
Read more: SBI Home Loan: All You Need To Know Before Applying For SBI Regular Home Loan
If you are planning to take a home loan, here are some important things you should know:
- cibil score– Banks and other lenders check your CIBIL score before approving your loan.
- eligibility– Mainly the home loan eligibility is decided on the basis of the income and repayment capacity of the customers.
- home loan interest rate– Compare rates from different banks before making a decision. One can easily browse online and check the prevailing interest rate.
type of interest– Fixed, floating or mixed rate home loans
one in fixed rate loanThe interest rate is fixed at the time of taking the home loan. On the other hand, floating rate or adjustable rate home loans are linked to the lender’s benchmark rate, which is, in turn, in sync with the market interest rate and that of the RBI.
compound interest rate There is another option where the tenure is fixed for a fixed rate and then floating rate is applied.
- Home Loan Types– Know about the different types of home loans that you can avail. Banks offer many loan products. Choose the one best suited to your requirement.
- processing fees: Check whether there is any processing fee involved. Banks charge a certain percentage of the loan amount as processing fee or a minimum amount is fixed. There may be other loan-related fees, including documentation and legal fees. It is advised to thoroughly check the details with the lender.
- insurance cover– Check whether the loan requires a loan cover term assurance plan or not.
- loan amount– Check whether the loan amount is available as per your requirement. Most lenders offer home loans ranging from 75 to 90% of the cost of the property. However, the exact ratio will depend on the loan value.
- credit period– What is the tenure of the loan and till when you will be paying the EMIs. The longer the tenure, the more interest you will have to pay.
- Preclosure / Foreclosure – Check whether your loan has foreclosure option and what are the charges involved. Under home loan pre-closure, a borrower has the option to pay off the loan before the actual pre-determined period. One can take a foreclosure home loan to save on interest.
- tax benefitsHome loans come with tax benefits, and you can claim tax deductions on the principal and interest paid on the home loan. Make sure you are aware of the tax benefits before applying for the loan.
- Legal Documents– Check what kind of documents are being asked by the lender for the purpose of KYC and loan process. This may include income, employment proof and basic asset documents which need to be submitted for loan disbursement.
If you are a home loan customer then there are some benefits too. The government has made provisions for tax benefits on both principal payment and interest payment on home loans.
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