Author: Credit Sudhaar

Difference between a home loan, mortgage loan and a loan against property

The loan, this four alphabet word has become pretty popular of late. From basic need of food clothing and shelter upto the luxury, everything is no available on loans. Why loans but? There are so many things which if planned for, will take years to achieve or buy for. Loans make it a little simpler for anyone to leave a dream one has seen to complete today. Different types of loans and different types of lenders are hence available in the market and let us closely look at such examples of three types of loan which may appear same but actually are different.

Let us first understand two basic kinds of loans. Secured loan and unsecured loan. A secured loan is something where the borrower has to keep or has kept something as collateral against the money taken. The gold loan, auto loan, home loan are few of the examples of secured loan. An unsecured loan is the one where there is no collateral kept against the amount borrowed. Personal loan, business loans are examples of it. Also one has to understand that credit score is one of a very major factor for a loan to get approved or rejected. A low credit score or conventionally spoken as the low cibil score makes it difficult for a borrower to get the loan application approved and hence if one knows that they are having a low cibil score, the first and foremost thing to do is work on it.

Home loan

A Home loan is, of course, a secured type of loan where the borrower wants to buy a home and hence is borrowing money from the lender which is a financial institute. Either a bank or an NBFC(Non-Banking Financial Institution) checks the eligibility of the borrower doing various checks and then approves the application. In a home loan, the end user is fixed and cannot be then changed and is, of course, the purpose of buying a house. There are various banks who offer a home loan with lucrative interest rates. HDFC home loan is one of the popular loans available today.

Mortgage loan

A mortgage acts collateral kept in a form of an asset against the money required. Here, the borrower willingly keeps any of a real estate asset as a form of security against the money they want with financial institutions. Since the banks or the NBFCs have the backup in terms of an asset that is kept as security, it becomes simpler and easier to get the loan application approved otherwise. A home loan one of the types of mortgage loans that is available. However, as mentioned, in the home loan the end use of the capital is fixed i.e. to buy a house. And also, in a home loan, the capital is given to buy a house whereas, in mortgage loan, the asset is kept as the security against the capital taken for the use. So, even if this looks pretty similar but are actually different in context to collateral kept first and then received money versus money received to buy an asset.

Loan against Property

A concept very similar to a mortgage loan is a loan against property also known as LAP. Loan against property is a type of loan where the borrower keeps any type of his or her property as the security for the loan to get sanctioned. A house, a piece of land, business premises, any of these things could be kept as security while getting a loan.

One important thing that one has to understand is, that even if the types of loans mentioned above are secured type of loans where the banks have security kept against the amount borrowed, it still has to clear few checks like getting the cibil score or the credit score checked. A low cibil score individual still may have the application rejected. The property papers without any legal issues, the repayment capacity etc are taken a close look at. So, one has to make it clear that only after these checks the loan will be approved!

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7 Key factors that decide home loan eligibility for a private employee

A home loan has made it easier to fulfill the dream of having a home of your choice fifteen or twenty years prior to what you had seen. Financial institutions helping an individual to buy a home with the fundings thus has become very popular and in-trend if one has to explain it like that. However, it’s not a cake walk. Nothing comes as easy! Since a huge amount of money is taken into consideration, there are various checks that any lender will do in order to make sure that capital they approve is to a non-risky profile. Let us check at seven main factors that decide the loan eligibility for a salaried employee.

1. Income

The first of course and the foremost thing that is to be checked when the application is received is the income of the borrower. If suppose a 50 lakhs loan is applied to buy a house with the interest rate of 9.5% as a fixed home loan interest rate for the tenure of twenty years, then the borrower has to pay approximately 23,000 Rs. Per month as the EMI. Usually, the loan amount should be maximum as 30% of the applicant’s income is what the lenders check and only then the application is approved. So, for the above illustration, the application will easily be approved if the applicant has a salary of roughly 77,000 and above.

2. Age

Age is also an important factor when it comes to getting the loan approved. The usual age bar for home loans is 20-60 years with the obvious logic of the usual age of earning to an average life span considered. The upper cap somehow in different banks may be of 55 years.

3. Credit History

Here comes of the major factor that is checked while looking at the loan application. A credit history is actually a result of how responsible an individual is in repaying the credits they have been using till date. A decent score above 650 or 700 will not have to though go through much stress of getting the loan approved compared to the one who has a score lower than that. It is advisable to hence check the credit report before applying for a loan as if one has to work on the score, it is better to do it beforehand then getting a few rejections on the application. Anyway, one free CIBIL report can be applied for each year as per the RBIL rules for each individual. And it is also a good practice to check the score if not twice but atleast once each year to know if all is on track.

4. Occupation

Not all individuals with all occupations get the loan application approved. Actors, Lawyers, Army/Navy professionals are few of the occupations which do not fall into the category of getting the loan approvals.

5. Rapport with bank

If the employee who is applying for the loan is an old customer of the bank, the rapport of him or her is checked while looking at the application. Of course, no financial institutions would like to approve the application of a person who has had a bad reputation with the banking professional and who have not been cooperative in past credits taken.

6. Location

The location of the home that one has to buy is also an important factor for the approval of the loan application. Banks or NBFCs have specific areas where they are allowed to approved the loans for. The areas that are beyond the geographic location set for banks will not be approved by the banks when an application is received by them.

7. Work experience

The employee’s work experience is also checked while getting the application approved. An individual who has just started working or an individual who has not been very stable in past of their jobs will have to face a little difficulty in getting the loan application approved.

Except these major seven factors mentioned above, there are few other factors like employer reputation, spouse’s income in case of married individuals, or any surplus incomes are also checked as the back-up while considering the loan application. It may look lengthy but is not as difficult to crack this when one is planning to buy the most important thing in their lives! And that is their home! So the ones who are planning to buy a house, make sure you have major ticks on the factors mentioned above!

 

5 Parameters that determine your home loan tenure

There are lot of things to consider when it comes to buying a house and applying for a home loan with it. Purchasing a house is always on the cards for almost every individual. No matter how many properties you have that belong to your ancestors, buying your own property has its own kick to it. But buying a property in today’s situation is getting tougher and tougher; you must consider a thousand things before you purchase a house. Factors like property, location, developer brand, etc plays an important role when it comes to buying a house.

Once you have considered which property you have shortlisted, then the process of applying for a loan starts. This process is equally hectic as finding a property. Applying for home loans is never easy; it is an entirely different genre when it comes to loans and financial product. It takes at least fifteen days to get your home loan approved and in those fifteen days you will go for a loan roller costar ride which will show you star. You will have to consider ample number of things when it comes to home loan and things associated to it like amount, interest rate, tenure, etc.

Speaking of tenure, when you do your research you find a lot of articles on loans, interest rates, etc, but you will never find an article which will give you a proper insight on tenure and how loan tenure plays an important role when you apply for a home loan.

Today, we will sight you parameters to consider in terms of tenure when you apply for a home loan.

Age

The very first and important factor to consider is your age. Your age plays an important role when it comes to considering your loan tenure. If you lie in the age bracket f 20 to 30 years you can easily apply for a loan with tenure of 20 to 25 years. If you are considering taking a loan in your 40s, then it will be a challenge for you as the bank will only consider giving you tenure span of 10 to 15 years maximum.

Income

Your income will be considered to determine the loan amount to be sanctioned and also the tenure. If you happened to have a good income source, you will be getting a good amount for loan and also you can consider a long tenure to repay the loan. In some cases, people try getting a high loan amount with short tenure being confident on the basis of their income, what they do not consider is the inflation rate, job stability, etc. and end up default the loan in future.

Purpose

One should understand the purpose of taking a home loan. While the EMI is calculated, do understand that the amount includes your interest amount and principle amount. The banks take all the interest out in the initial years and you are only contributing a small chunk for your principle. When and where you get the opportunity, you should start repaying small bullet payments which will not only save you interest, but will also save your tenure.

Which bank you are applying from

It is really important to do your homework before you apply for a loan. The home work includes checking your free cibil report, etc. The most important factor would be to shortlist a lender who will not dig a big hole in your pocket when you opt for a long tenure.

Backup plan

You can switch banks in the process of repayment if you have a better offer from a competitor home loan lender. Always have a backup plan to consider if you can save money in terms of extending or shrinking the tenure.

Loan tenure plays an important role which many choose to ignore. Always take every aspect of a loan into consideration and be in financial harmony.