Savita, a Kolkata based engineer, decided to apply for home loan in order to fulfil her long-cherished dream of owning a house. Tired of knocking the doors of several financiers, she chose a lender having convincing salespersons, without really conducting any prior research. As a result, she has to deal with several ordeals while repaying her debt, including dealing with scores of hidden charges, inflexible loan options and heavy penalties.
Though financial insight proves to be helpful, it is not required so often. Consumers search for the most reputable home loan providers and often end up getting trapped in the wordy circles of the best salesperson.
It, thus, becomes important to do your homework and take into consideration every factor before opting for a particular lender.
Importance of taking a home loan from a reliable lender
Stringent terms and conditions and absurd policies are the trademark of financiers that every potential borrower must avoid. It is only a reliable lender who would offer the needed flexibility when it comes to terms and conditions of the loan.
Apart from that, only a reliable bank would provide superior customer service and be willing to go down that extra mile for keeping its customers satisfied.
It is wise to check the reputation of a lender if you don't hold any relation with the bank.
FACTORS TO CONSIDER
Considering every possible, decision-affecting factor, planning out everything and following it systematically is the key to a smooth, hassle-free journey to owning your dream abode.
There are numerous factors that help make a better decision when selecting the right provider for your home loan. Six of them are discussed below:
1. Processing and disbursal speed
Dealing with a lender that rules out the possibility of any delays and is quick in processing a home loan application always proves beneficial in the long run. Normally, if everything is in order, it takes 10-15 working days for banks to process an application.
Once approved, the lenders take additional 3-5 days for disbursing the amount of sanctioned loan.
2. Loan qualification
Internal lending criteria vary from one bank to another and it is on the basis of these that a particular amount of home loan is approved for the borrower. The criteria might cover the borrower's age, job profile (preferably salaried, because of easily understandable salary slips and ITRs), employment stability, credit history, among other aspects.
There are several calculators and eligibility charts, for instance the one offered by ICICI Bank, which help the borrowers in apprehending their eligibility well in advance.
3. Repayment terms
There are certain terms and conditions pertaining to repayment of the home loan imposed by banks on customers. Potential borrowers must clarify the terms related to settlement/foreclosing the outstanding amount, transferring the balance to another lender's account, prepaying a part or full amount of home loan, and other things, before finalising a lender.
4. How much should you pay?
The cost of taking a home loan would certainly vary from one bank to another. It depends upon the decision-making abilities of the borrower whether securing a home loan would prove to be an economical affair or a cost laden one.
However, there are certain things that one must weigh carefully at the cost front.
5. Fixed vs. floating rates
The rates vary from time to time, and as in the case of a well-planned investment portfolio, one must analyse the liability portfolio and plan on getting the maximum out of it. As a rule of thumb, if the loan period ranges between 2 to 5 years, going with a fixed interest rate is considered an ideal move.
Otherwise, floating rates are considered ideal for long tenure loans.
You can even go for a hybrid loan, which enables the borrower to enjoy the best of both fixed and floating interest rates. (Read more about the hybrid loan option)
6. Hidden charges
Hidden charges is something that tends to prick the pocket of borrowers the most. Thus, while narrowing down the options, it is advisable to compare the processing fee, down payment, valuation fees, prepayment costs and other charges levied by different lenders.
Making the choice
Different lenders use different yardsticks for measuring the borrower's eligibility. Why shouldn't borrowers consider doing research and compare several competitive features of home loans offered by different lenders? It is better to have the policies, facts, terms and conditions clarified well in advance before locking in a seemingly ideal home loan with any lender.
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