6 Things you should know before taking a home loan

10:06
Can you think of buying a house without taking a home loan? Many Indian families have to depend on home loans to buy their dream house. While taking a home loan is may seem like an easier process, however, it is not as easy as it looks. With all the paperwork and run around, it often becomes quite challenging. However, if you have planned to take the loan, you need to get acquainted with the process and all the nitty gritties to avoid any surprises later. So, go through these tips to brush up your knowledge about home loans.

  1. Deciding on the bank - Almost every bank or financial institution offers home loan facility today. To make the opportunity more tempting, these banks provide various offers to lure customers. However, as a customer, you need to be very careful before you take a step forward. Do a thorough research to decide on the bank. Consider at least 4 – 5 banks, read their terms and conditions carefully and do all the background check before settling for one bank.
  2. Interest Rates – One of the biggest factors while deciding on a home loan is the interest rates. Make sure you have a full understanding of the EMI calculations. Whether you should go for a floating or fixed rate of interest? Obviously, fixed sounds more manageable, however, it is also expensive than the floating rate of interest. So, study about the market trends and how the interest rates have been trending in the last six months. The more you study, the better decision you will be able to make.
  3. Cost-effectiveness – While home loans may seem like a good option, however, you need to understand the long-term financial effects of it as well. Humans get quite emotional when it comes to buying their dream homes. But, every aspect of taking the home loan should be thought carefully through your mind and not by your heart. Think about down-payment, EMI’s and other financial commitments properly before taking a home loan.
  4. Eligibility – Every bank or financial institution check your eligibility before approving your loan. Credit score plays an important role in the approval or denial of a home loan. Banks are highly concerned about their money and hence, they want to ensure that the borrower has a good repayment history before they approve a loan. A bad credit score can result in denial of the loan and good credit score can earn you a lot of benefits along with the loan sanction.
  5. Loan tenure – This is also a very important point to consider when taking a home loan. Many people take loans for longer tenure because then they are easily affordable. However, what borrowers don’t realize is that longer tenures mean higher interest payments. Your home loans become automatically expensive if you go for longer tenures. So, you might want to consider paying lump sum amounts when possible to reduce the loan amount and tenure.
  6. Refinancing – This option basically comes after you receive the loan. if you feel that your bank is taking a higher rate of interest and jeopardizing your monthly expenditures, you can look for other banks who are charging a low rate of interest and get your loans refinanced with the other bank. Though there may be charges that you would have to pay in order to avail the facility, in the longer run, it is actually a good option.
Final Word
Home loans are indeed a good option for people who don’t have enough money to buy their dream house. It also provides greater benefits, but as a consumer, it is your right to know and understand every aspect of a product or service before you take it. So, before taking a home loan, make sure that you have a full understanding of all the terms and conditions in order to enjoy the benefits and even save money. Since home loans are for longer tenures, you would be entailing a long-term relationship with your lender. Therefore, it becomes all the more important to consider these points before signing up for this relationship.

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