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Planning to Take a Home Loan? Read This Guide before Making a Decision
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A home loan is a great credit product to arrange funds for a property purchase without the need to exhaust all your savings. Due to the enormous hike in real estate prices, home loans have become a popular financing option in recent times. However, before applying for a home loan, it’s advisable to make note of some important factors that can ease the home loan application process and simplify loan repayment. Mentioned below is a quick home loan guide that will help you in availing the best deal for yourself:
A credit score or CIBIL score is a numeric value ranging from 300 to 900 that reflects a borrower’s creditworthiness. It is derived based on the borrower’s repayment history, credit utilization, credit type & duration. A high credit score will make you eligible for a higher loan amount at a competitive interest rate. Therefore, before applying for a home loan, ensure to check your credit score by fetching the credit report. In case you have a low credit score, take necessary measures to improve it beforehand.
Evaluate your repayment capacity carefully before deciding the monthly instalment and loan tenure. You can make use of the home loan EMI calculator to get an estimate of the EMIs beforehand. While it’s best to close the loan as soon as possible, you must not increase the EMIs beyond your repayment capacity.
A good way to repay home loan faster is by making part prepayments from time to time. You can use your bonuses and additional income to prepay the home loan and reduce debt burden. However, the prepayment norms and charges may vary from one lender to another. Thus, make sure that you are well aware of the norms for the foreclosure and part-payment set by the lender before availing the home loan. Also, make a note of the lock-in period and payment delayed penalties.
Before finalizing your lender, it’s advisable to learn the difference between fixed and floating interest rates so that you can choose the right lender. Fixed interest rate remains constant throughout the loan tenure, whereas floating interest rate may fluctuate depending upon the market volatility. Since home loans are a long-term repayment responsibility, you must be extra careful while choosing the type of interest rate on the loan.
Make sure to check your monthly expenses, consider a tenure basis your repayment capacity. By following the tips mentioned in the article, you will be able to avail the best home loan for yourself. Lastly, read all the home loan documents carefully before taking a final call. In case of any query, do not hesitate to seek the help of a financial expert.
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