The growing economy of India has led to the expansion of the Banking and Finance sector in our country. As on today, there are a large number of financial institutions that provide credit products such as personal loans, vehicle loans, home loans, top-up loans, etc with lucrative features. Also, the advent of digitization has made the process of availing loans significantly easier. One of the most commonly availed credit products is the home loan.
Due to the increasing popularity of home loans, many financial institutions provide various complimentary offers and schemes in order to attract potential borrowers. Therefore, at times, it might become difficult to choose between the various options available. Below are a few tips that can help you assess all the features of a home loan, thereby allowing you to make the best choice for yourself.
The Loan Amount
While availing a home loan, it is essential to keep the loan amount as close to the requirement as possible. The higher the loan amount, the higher will be the interest rate and the loan term. This can significantly increase the overall cost of borrowing in the long run. Therefore, before applying for a home loan, it is essential to carefully decide the loan amount that you would require.
Rate of Interest
It is recommended to check the interest rates of the various financial institutions and settle for the one that offers the most competitive rate. At the same time, it is essential to check whether the interest rate offered is fixed or floating. A fixed rate of interest remains unaffected due to market fluctuations whereas, for floating rates, market conditions affect the interest rate. Since the rate of interest will play a vital role in deciding the EMI, it is important to make a note of it while applying for a home loan. Moreover, in order to get a better estimate of your monthly installments, you can use an online EMI calculator. This will allow you to plan your monthly expenses wisely.
EMI payment procedure
While availing a home loan, you must check the methods of payment, such as online payment, post-dated cheques, auto-payment, etc. provided by the financial institution.
Loan Processing Fees
Banks and other financial institution charge an amount for processing any loan request, this is known as the loan processing fee. It is calculated as a percentage of the loan amount. Typically, 0.25%-2% of the loan amount is charged as the processing fee. Some lenders also levy additional charges such as prepayment penalties, conversion charges, etc. Hence, before availing a home loan, it is essential to have a talk with the loan-provider regarding these additional charges.
As per the standard procedure, financial institutions require supporting documents for age, address, and income proof. However, apart from the regular KYC requirements, you should also pay attention to any additional documents required to complete the process.
You should also check the home loan eligibility criteria of the financial institutions before availing a home loan. Now that you are well aware of the various aspects to consider before availing a home loan, make sure that you settle for a loan that best suits your requirements.