Home loans for your Dream Home

Getting your dream home is not at all tough in today’s scenario.  Many banks, financial institutions, NBFCs and housing finance institutions are willing to give loan at person doorstep. The person will find his mailbox full of mails from various financial institutions that provide home loans, at highly reasonable interest rates along with other benefits attach to it.

The terms and conditions of each bank, NBFCs, financial institutions and housing finance company differs. Though, the home loan interest rates which are levied on the loan amount are more or less close to each other. The lenders of home loan ask for property documents for the security purpose, i.e. in case if the customer defaults in repaying the amount then the bank will seize his property. In banking terminology, we called it as collateral security. The lenders of the home loan scrutinize the property documents, to find the real value or intrinsic value of the property. After doing thorough study of these documents, if bank find it fair and right then, they considered the person property as collateral security.

One can take home loans for various reasons, for the purchase of land or flat or property, or built up house or for renovation of existing house, etc. The lenders have fixed various parameters for granting home loan, which the person, should take care before applying for the home loan.

The person can fill up the form online or can physically submit it in the bank. In this form, the person has to fill up his personal details, such as name, age, contact no, employment details, pan no, passport no, income details, saving details, details of existing loan (if any). The lender takes all these information so to make sure that the person has the repaying ability.

The lenders provide two types of home loan: fixed rate home loan & floating rate home loan. In fixed rate home loan, rate of interest does not change with the change in the market like change in inflation, or in RBI Repo rate or CRR. Whereas, in floating rate home loan, the interest rates changes with change in following criteria, i.e. if the inflation rate increases the interest rate also increases and Vice Versa. The person can also prepay the loan amount without any penalty in floating interest rate.

One should read the terms and conditions of the home loan carefully before signing the document and ensure themselves that the person has understood all the terms, additional charges, interest rates and EMI amount of the loan.

Auto Loan: Helps in Realizing Dream of Having a Car

If one is planning to own a car, then one can easily satisfy his desire by getting an auto loan for car. In car loan one does not face many problems, as it does not involve much paperwork, as in case of home loan. The bank and financial institutions normally do not do physical verification of the asset, but just checks the process of getting a car loan.

Firstly, the applicant has to approach the lender for availing the car loan. The customer should ensure that the person will meet as many lenders as one can, so that the person gets the best deal of an auto loan. One should finalize any lender only when the person is satisfied with the auto loan interest rate, special offer on an auto loan, loan amount, loan tenure, etc.

Secondly, the person should meet the financing agent, who will check his identity proofs, residence proofs, income proofs, etc. the borrower has to furnish his details of income by providing docs of salary slips and Form 16, in case of salaried and ITR & balance sheet & profit & loss account, in case of self employed. The documentation of an auto loan differs with the lender.

Thirdly, after the applicant submitted his documents, the field investigator visits the applicant house to check the customer creditability. It is essential for the customer to be at home during such investigation.

Other requirements for availing this loan are that the customer should be above the age of 21 and maximum age is 60 for applying the loan. The customer income should also have an annual income of and above Rs.1lac.

The customer can also avail personal loan for purchasing a car, but the amount of the loan may differ from lender to lender, as the interest rate varies among different lenders. The amount of the loan also depends upon the model of the car. The banks usually provide 85% of the market cost of an auto loan. One can avail loan minimum of Rs.1lac for a new car and a second hand car; one can avail minimum loan of Rs.75000. The person can repay the loan amount from 1 yr to 5 Yrs, and in some cases, it is 7yrs. One can repay the amount through EMI. Though, the interest rate and the EMI amount vary in personal loan as it depends upon the loan amount, loan tenure and customer profile.

Difference between an Unsecured Personal Loan and a Secured Personal Loan

This is the question that most of the customers ask, and even many people are not aware also, that in the market one can avail various types of personal loans. Each personal loan type whether is a secured loan or an unsecured loan has its own requirements.

First of all, let we discuss secured personal loan. As the name suggests, secured loan means getting loan by giving any security to the lender for getting the loan. The most common things that are used to pledge for the loan are like as your property, house, land irrespective of residential or commercial, automobile, gold, investments in stocks or commodities, certificates of deposits, saving account, fixed deposits, bonds, etc.

Lenders feel relax while lending a secured personal loan to the borrower, as the risk of defaulting is low, as the person has provided collateral. In case of default bank will seize the person security that has been provided for getting the loan. The bank provides this loan at low interest rate and for longer repayment period as compared to unsecured loan.

If the borrower does not have any asset to pledge then, person does not qualify to get the secured personal loan. In this case, the person can get unsecured loan, i.e. unsecured personal loan. This is the option that is mostly availed by the customers of the personal loan.

Unsecured personal loan means that the person does not have to provide any collateral for getting the loan amount. This loan is given on the credit worthiness of the customer, so a person can avail this loan only if the customer track record of past credit is excellent.

The person with high credit score has more chances of getting this loan than from the person whose credit score is low. The person with high credit score can also avail high loan amount that too with low interest rate. If the person credit score is poor, then there are chances of getting rejection, even if the person loan is approved in this case, the person will get high interest rate on the loan.

Now days, one can get extremely attractive offers on unsecured loan in the form of reasonable interest rates or any other benefit on the loan. Then also, the loan amount will remain low in unsecured loan as compared to the personal loan and interest rates will also be little high in unsecured loan.

5 Ways to deal with high rates of Home Loan

There is always constant speculation for interest rates in the market, as will rise further, will remain constant or will fall. If the interest rate increases, then it makes tough for many households to cop up with it and many people find tough to manage their budget. In this case, one should follow the following ways to get rid of from high interest rate.

1.      Converting loans interest rate from floating rate to fixed rate

Those people who fear that the current floating rate of interest will rise in the near future and will exceed the fixed interest rate should try to convert their home loan rates from floating interest rate into fixed interest rate. Though, banks also revise the fixed rate of interest but after a certain period mainly after 3 years. One should opt for this only after; one understands its term and conditions and any charges applicable upon converting the home loan interest rate.

2.      Switching from one bank to another bank which provides better rate

In this case, one can also switch from one bank to another bank which provides better interest rate. One should check that the transfer of balance just benefit him. It means that charges levied on balance transfer are not so high that it out weighs his existing home loan. Therefore, one should check the loan tenure, amount of EMI and charges on transfer of balance.

3.      Try to get a loan for long duration

The person should try that his loan tenure increases, as it will decrease his monthly EMI amount. In this age factor plays the vital role, as banks will only increase the loan tenure if the borrower is not near to retirement age. For salaried person, the retirement age is 60 and for self employed it is 65 Yrs.

4.      Prepayment of the home loan

One should try to do apart payment of his loan, as it will reduce his loan burden and tenure. Most of the banks provide this option, subject to its terms. For the part repayment of the loan, one should do by his savings or investments but not taking another loan or by overdraft. Though, it will decrease the home loan burden, but on the other side, it is adding another loan liability on your financial budget.

5.      Try to minimize unnecessary expenditures

One should manage his funds by doing monthly budget. It not only helps the customer in reducing his unnecessary expenditures but also in increasing his savings. From it, one can do apart payment of his loan, which will not only reduce his loan burden but also will reduce the EMI amount.

The rates of home loan follow a cycle that it may continue rise or fall, totally depends upon the market force. The rates of home loan will increase or decrease; it totally depends upon the time.

Understand Credit profile

Age factor is crucial

Home loans are usually available for longer tenure around 20 to 25 years. Though, one can avail the maximum tenure depends upon the customer's age in which he is applying for the loan. The age factor plays a vital role in deciding upon the tenure of the loan especially when the person is near to the retirement.

It is observed that customers who are in the age group of 50s apply for the home loan. In this case, if the person requires 20 yrs tenure, so that he can easily pay the EMI, then he should go for joint home loan. It will not only increase the loan amount but will also increase the loan tenure.

Importance of the place of employment and its stability

Banks lay a lot of stress on job stability and even on the place of employment where the customer works. They demand that the customer should have worked for more than 1 year or 3 years. There are cases where bank does not provide loan if they are curious towards the company’s future. One should not change their job so fast, as it affects his creditability. Try to remain for 1year in a company.

Does gender make any difference in getting the loan?

Few years back, the banks oppose to provide the loan to the women who are single. The reason behind this was the fear of the bank of losing income if the women get married. But in today’s time, this view has been changed towards the women.  Now, women are also career oriented. So the banks are tapping this emerging segment. Though, in some cases bank still asks for the guarantor. It can be her husband or parents. In the home loan, one should go for a joint home loan as it increases the eligibility of the person for the higher loan amount.

Track record of repayment

It is another crucial factor for the processing of any loan application may be it is a home loan or a personal loan. If the person defaults in paying the credit card bill, or any EMI of the previous loan, it affects his CIBIL score. When the bank looks upon the past track record, and it finds out any default in the repayment of the loan, the banks do not sanction loan easily. Even if one’s loan is sanctioned, the interest rate will be high in this case. So, one should never default in repayment of the loan EMI or payment of the credit card.