Six Steps to Check Before Availing a Home Loan
Purchasing a home is an important financial decision for an individual’s life. A Home Loan is a plan that offers monetary support to people for buying a home. But, before applying for a home loan, make sure that you analyze the following aspects:
- Know your maximum loan eligibility: The loan amount that you can acquire depends upon your salary and the record of your repaying loan. Usually, a bank offers around 80% of the market rate of the property as the loan amount. It all depends upon the capability to repay the loan amount in time.
- Check your CIBIL score: The credit score of a person plays an important role in qualifying for a loan. Credit Information Bureau India Limited (CIBIL) provides a score between 300 to 900 based upon your existing loans, loan repayments, cheque bounces, bank accounts, credit card usage, etc. People with CIBIL score greater than 700 are more likely to get a home loan.
- Type of interest rate: The type of interest rates you choose affects your monthly EMI. So, it is important that you know the difference between fixed and variable interest rates. In the case of fixed interest rates, the monthly payments remain constant over the tenure of the loan. Under floating interest rates, the rate varies with the fluctuations in the market.
- Tenure of the loan: The monthly instalments are calculated with EMI calculator on the basis of the loan amount, interest rates, and the tenure of the loan. The monthly instalment is inversely proportional to the loan tenure, which means the longer the tenure lower the EMI and the shorter the tenure, the higher the EMI. Also, the interest rate is directly proportional to the loan tenure. Higher the tenure, the higher rate of interest paid, and vice versa.
- Read the documents carefully before you sign: Check the documents carefully and make sure that you understand each and everything. Know the processing fee, late payment fee, and any charges that are applicable for prepaying the loan.
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