According to a recent report, lending institutions have cut down their home loan rates to boost their portfolio. This information indicates a suitable time for individuals to avail these credits to finance the purchase of a house.
This advance offers considerable credits against attractive terms of borrowing. Lenders, however, impose strict eligibility criteria and levy a current home loan interest rate based on several linked factors.
Keeping this in mind, potential borrowers need to be aware of a few factors before applying for home loan.
Points to keep in mind before initiating a home loan application
- Credit score
Irrespective of whether they are a first-time borrower or existing one, lenders evaluate an applicant’s credit score before loan approval. This factor substantiates an applicant’s repayment capability and reduces the risk of default. Typically, a financial institution prefers a borrower with a 750+ CIBIL score and limited existing liabilities.
Maintaining a reliable repayment history provides an individual with the power to negotiate a lower interest rate.
- EMI obligation
Availing a home loan obligates a borrower to follow a monthly repayment structure. Hence it is important to compare different lenders to find a suitable option.
- Tenor
Individuals must be aware of the housing loan tenor and choose wisely. This would help them in planning and evaluating the repayment capability. Typically, selecting a short tenor assures a lower interest rate but increases the EMI outgo. Comparatively, a longer tenor brings down the EMI obligation but raises the overall interest paid.
- Documentation
Potential borrowers must also check the documents required mentioned by lenders. Keeping these documents handy would streamline the total application process and make it swift.
Some of the common documents required are –
- KYC documents
- Income proof
- Bank statements for the previous six months
- Business vintage of five years.
Apart from the mentioned documents, individuals might need to submit property papers, photographs, etc.
However, if an individual fails to satisfy the eligibility and documentation requirements, opting for a loan against property can work as a viable solution. This credit form offers substantial funds with no-end usage restrictions and can effectively help to finance the purchase of a house, as well.
To double up the benefits, one must find a suitable lender offering additional benefits. Some HFCs provide pre-approved offers that make the loan application hassle-free and swift. Such offers are usually levied on products like home loans, LAP, etc. Check your pre-approved offer by entering a name and contact number.
Some of the advantages of availing a loan against property are –
- High loan value
This loan variant offers borrowers a high loan value against the nominal loan against property interest rate. Depending on a mortgage’s market value, both salaried and self-employed applicants can avail substantial funds.
- No end-use restriction
A LAP borrower receives the privilege of spending the disbursed funds without restrictions. Borrowers can utilise the credits sanctioned to clear financial liabilities like credit card bills or outstanding debts.
- Flexible tenor
Since a LAP loan is secured in nature, many financial institutions extend a flexible repayment tenor against it. Borrowers can extend the repayment tenor up to twenty years. However, it is essential to evaluate one’s repayment capability before choosing a shorter or longer tenor.
- Tax benefits
If the loan amount is utilised to purchase a property or house, borrowers can claim deductions on interest repaid under Section 24(b). Individuals can gain up to Rs.2 lakh as a tax benefit, provided that he/she can prove the link between borrowing and fund usage. However, an individual can’t claim deductions on the principal repayment.
A home loan is a convenient credit form for individuals planning to invest in any residential property. Though the loan variant seems lucrative, it comes with certain variables which borrowers must know. If one fails to clear the parameters or desires a secured alternative, they can avail a credit form like a loan against property.
