Must read through before you apply for a home loan

Posted On December 15, 2020December 15, 2020

More or less every financial institution in the country offers home loans to prospective home buyers. These offers are quite feasible and come with competitive interest rates and flexible tenures. However, before availing of a home loan you must have a good financial plan in place and be clear about long and short-term objectives. An option for instant home loan turns out to be the best.

Top 5 things you need to know before applying for a home loan

Once you are clear about your goals and have a good financial plan, the next step is to choose the appropriate financial organisation that aligns with your plans. Thus it is important for you to have sound knowledge about certain parameters before availing of a home loan. These are given below. 

Research

The first and foremost thing that you need to do is research thoroughly about various financial institutions. There is an uncountable number of NBFCs and banking institutions that offer home loans and every financial institution has an online website. You can sit at the comfort of your home and search for different institutions that offer home loans and compare their tenure, rates of interest, processing fee and other loan related charges. Choose an option that seems the most feasible for you and serves all your needs. 

Credit score

This is one of the most important factors in deciding your loan amount and interest rate. Having a good CIBIL score will enable you to acquire good home loan deals. It is important that you maintain a credit score of 750 and above. It reflects your creditworthiness and the bank will approve you as a responsible creditor and offer you loans at lesser interest rates and offer you other benefits. 

Penalties

It is important that you are well aware of foreclosure and other penalty charges when you apply for a home loan. A home loan goes on for a duration of more than twenty plus years. Hence, there may be a time that you want to foreclose the loan, so it is important you know about the foreclosure charges. Also, be aware of the penalties for default payments and know about the lock-in period.

Floating versus fixed interest rates

Before applying for a home loan be sure about the type of interest rates, that are floating or fixed interest rates. The floating interest rates are impacted by market volatility and thus can keep altering with fluctuations in the market. Whereas the fixed interest rate is free from market volatility and thus the rate stays the same throughout the entire period. Although the rates are higher in this matter, it is a safer option as there is no chance of the interest rate climbing up. 

Processing fee

The processing charges vary from bank to bank and it cannot be evaded. Although the processing fee is not more than 2% of the principal amount, it still a significant amount of the entire loan. Thus it is important you look for an institution where the processing fee is low.

Never sign up for anything before thoroughly checking its fine print. Missing out even the most minute information can land you in financial troubles in the long run. You must have a clear knowledge and understanding of each and everything related to your home loan. Thus do not forget to peruse the fine print thoroughly.