Important to know for a home loan seeker

A home loan includes great deal of intricacies which are often include arcane terms and hence making it difficult for a commoner and even difficult for the first time borrowers. Most of the loan applicants do not take the matter seriously and hence are likely to suffer set backs in the later part of the loan tenure.

While sanctioning a loan, lenders are more concerned about the future aspects as they do not want a customer who would default on his loan. To keep things simple they want to make sure in the beginning itself whether the applicant would be able to manage his loan or not, if an applicant does not satisfy a certain criteria then the lenders reject the proposal straight away.

To avoid rejection an applicant must check his loan eligibility before he applies for a loan, which in turn is decided by a number of factors. Loan eligibility of a particular borrower is the maximum amount that he can borrow; it mainly depends on the income of the borrower.

A borrower must have an idea about his monthly expenses so that he can get an idea about the amount that he can pay as the monthly installment for his loan. An applicant must borrow an amount which he can repay easily and it also helps him to avoid the risk of rejection.

Credit score is also an important factor, lenders wants the applicant to have a high credit score as it gives the lender and idea that the person does not default much and can expect that he will not do so with him as well.

The nature of job can sometimes also play a deciding role, a person working with a reputed company is likely to face less difficulty in finding a lender as compared to a person working with a lesser known company. Also, if a person is a constant job hopper then it can also add to certain disadvantage for the applicant.

Prepayment penalty of home loans likely to go

Finally, after initial resistance, lenders have started to waive the prepayment penalty in home loans. The banks used to levy penalty on the customer that borrowed money from some other lender to make the prepayments. However, such a penalty was not applicable to a customer who is making prepayments solely through his own resources.

The Reserve Bank of India was never in favor of this practice which was followed by majority of the lenders. Setting an example for the other lender, the largest lender in the country State Bank of India earlier has waived the penalty for the new customers and now has exempted the existing customers from the penalty.

“Banks have already agreed, but they are not issuing the guideline (to their branches) that you cannot charge prepayment penalty. We are not clear why banks charge the prepayment penalty,” said Mr. K C Chakrabarty, Deputy Governor of RBI.

The Chairman and managing Director of Punjab National Bank, Mr. K. R. Ramath said “If the regulator ultimately wants it, we need to fall in line. The prepayment penalty is not an avenue for bankers to make money, but a mechanism to recover costs due to mismatch in assets and liabilities. If RBI feels we have to do away with that, as bankers we will have to find a way to recover the cost.”

Some other public sector banks including Bank of India, Indian Bank and United Bank of India have also waived prepayment penalty on floating rate retail loans and more lenders are expected to joint the group soon.

How you can notch those extra benefits?

The initial process of a home loan is the most difficult as well as decisive phase of a home loan, there are a lot of things that are to taken care of by a person before he gets into a deal with a lender. The fate of a dwelling loan depends on the approach of the borrower.

Once a loan has been borrowed it is just the payment of the installments which is left to be done, the difference is that with a good home loan deal can fetch some extra benefits to the borrower as well as there will be least complications involved in such a loan which in itself is sufficient to make borrowing an enjoyable experience.

It is the smart work which really pays off in a home loan, proper strategy is very necessary which can give a edge to that person over the other lender and which can enable him to extract the maximum benefits out of his home loan.

Like everything else here also basics are the key to success, if the primarily things which are required by the lender are in perfect order then the only thing the applicant is left to do with is to negotiate with the lenders which can offer him home loan scheme which can suit his requirements in the best possible manner.

To get the basics right the credit score of the applicant must be in perfect order which means he must have an impressive credit score, an applicant must be sure about his requirements and more importantly about the amount of loan which he is eligible for and the amount which he can repay comfortably.

If all these things are in perfect order then a person can be sure about grabbing a perfect loan scheme otherwise he wants to have one then he must get them corrected, a person with not such an impressive portfolio can also borrow a loan but then he would not have the leisure to get an extra bit from the lender, he would be able to avail only the regular features of the loan.

Be prudent while borrowing home loan

It is not only about borrowing a home loan but the most important thing is that whether the loan scheme that a person has borrowed is suitable for him and if yes then to what extent. Managing a loan is another very important task that a borrower has to tune with, the fact being that a borrower can manage a loan well only if it suits him or otherwise he must get ready for sleepless nights.

Even people who are aware about the basics of borrowing a home loan make several mistakes which can ruin the excitement of buying a home. They stick to the basics, which is very important but the mistake that they make is that they consider only the present market conditions and do not consider the future aspects which complicates the situation to a great extent.

As the Reserve Bank of India has been continuously hiking the policy rates resulting in hike of home loan rates, now considering this enormous hike most of the people which are borrowing home loans are opting for a fixed interest rate scheme.

Such people need to understand that this hike is not going to remain forever and someday the rates will fall and when it happens a borrower must make sure that he does not let go any single opportunity from where he can reap benefits and a borrower can do this through floating interest rate scheme which allows a person to witness every fluctuation in the market rate be it upwards or downwards.

While borrowing a home loan apart from taking intelligent decision a borrower also needs to be prudent in his approach and that is how he can take the maximum benefits out of his home loan.

Are you looking for a home loan?

When it comes to home loans there are a few things that must pass through the head of a person who has some idea about home loans and they are his credit report and his loan eligibility. If they are at their place whether they are supposed to be then a borrower is just left to steer through the loan procedure.

The loan eligibility of a borrower is the amount of the loan for which he is eligible and it is important that the applicant is aware of his borrowing limits because if the amount for which the borrower has applied for exceeds his borrowing capacity then the loan application is likely to be rejected.

What a borrower must do is that he must first get an idea bout his borrowing capacity and then he must look for the property accordingly, so that there his loan application gets approved and also it would make easy for the borrower to manage his loan.

Also, a person must check his credit report before he applies for the loan, if he has a good credit score then there is not much to worry about but if it is not then he might have to work hard to earn some points. It would take time but it is necessary to have a good credit score if he wants to avail best interest rates.

To do so he must try to repay all his pending debts as soon as possible without skipping any, while doing so the credit score will gradually improve and after that the person can apply for the loan.