Obtaining a home loan can be a difficult task in this day and age merely because of the loads of various offers and even more lenders in the market. This can be confusing and could possibly lead to making a wrong decision in terms of picking out a home loan. Sometimes, the cheapest lending rate may not possibly be the best loan option for a borrower. Fees to avail the loan, like processing fee, etc., may outweigh the slightly lesser rate of interest that a bank may be offering when compared to another bank.
The tips mentioned in this article hopes to help you decide on what type of home loan to opt for.
1. Type of Lender – Take time to figure out what type of lender you wish to avail your loan from. Primarily, there are two types of lenders, banks and NBFC (Non-Banking Financial Companies). Although it is easier to obtain a loan from a NBFC, one must understand that these lenders are not regulated by the RBI, making it slightly more risky and expensive to get a loan from them. A bank on the other hand is regulated by the RBI, which means that the rate of interest on home loans would be cheaper if obtained from a bank. Therefore, unless absolutely necessary, it is recommended that a home loan is availed from a bank.
2. Opt for an Appropriate Rest Date – Reset dates are is the time frame after which the interest rate on a loan changes. Reset dates can be opted on a monthly, quarterly, half yearly or yearly basis. If interest rates are likely to drop in future, then opting for a more frequent reset date would be sensible, and if it is likely to rise, then opting for a less frequent reset date would be advisable.
3. Tenure of the Loan – Since home loans are usually high amounts, a small variation in tenure could result in a large difference in amount payable. A shorter tenure would mean that you would end up paying lower interest totally, and vice versa. However, opting for a shorter tenure also means that you would be paying a higher EMI. If you are not financially capable of making high EMI payments, this should be avoided at all costs.
4. Down Payment - Making a larger down payment would ensure that the loan amount is smaller, which means that you would end up paying lesser interest. It is always advisable to save up before applying for a home loan. This will help you obtain a loan effortlessly and also help you save some money in the process as well.
Following these tips should help you avoid the pitfalls of obtaining a housing loan. A little bit of research coupled with a little financial discipline can help you make the most of your home loan. Home loans are long term commitments and therefore must be evaluated thoroughly before finally availing one.