Author: Credit Sudhaar

Tricks to get your Home loan approved

We all wish to have our own house someday, and start saving for it from the day we start earning. With rising property prices, not many people can save enough to buy a house at an early age. Home loans provide the financial support needed to purchase the dream home of your choice. But before a home loan is approved by the bank, the borrower is evaluated on several factors to establish his credit worthiness. For example income level, credit history, employment details, current liabilities are some core factors that form a part of axis bank home loan appraisal process.

Here are some tricks that you can follow to ensure that your home loan application gets approved.

  1. Maintain a healthy credit score-Your CIBIL Score is the most important thing that the banks consider to make a judgement about your creditworthiness. Make sure that you have a healthy credit profile. Make on time payments on your previous loans and credit card bills. Keep your credit card outstanding balances low. Do not apply for new credit cards or other kinds of loans 6 months prior to applying for a home loan. Such good credit habits will help improve your score and increase your chances of home loan approval. Though there are lenders who offer loans for low CIBIL score , one should avoid such options as they are available at a very high rate of interest. Home loan is a long term liability. Even a 0.5% difference of interest rate over a period of 20 years translates into a huge amount. So it is always advisable to work on your score before you apply for a home loan.

  1. Stable employment – Banks look for stability in the job of the applicant. An applicant who switches job too often or has recently changed his job is not preferred by the financial institutions. So if you are looking to change job, you may defer your plans till your home loan gets approved.

  1. Buy the right property– Banks follow a conservative approach and offer loans for only those properties that have a clear title and good resale value. So even if you are an eligible borrower, your application may get rejected if the property is involved in a legal battle. Before you decide to buy a property, ensure that the land title is clear and the builder is a reputed one.

  1. Go for a longer loan tenure – If the bank thinks that your current income will not be able to support the monthly EMI, and rejects the application for the amount of loan that you require, you can opt for a longer tenure. A longer tenure will reduce the EMI amount and make you eligible for the loan.

  1. Pay down previous debts- Your debt to income ratio is evaluated by the bank to determine whether you can easily afford the home loan EMIs. If you have an existing loan that is about to finish, it is better to arrange for some finances and pay off the loan. This will reduce your regular monthly commitments and free up your income that is available to service the home loan EMI. As your debt to income ratio improves so will your eligibility for a higher amount of home loan.

If you do not have sufficient funds to prepay the other loans, you may increase the tenure of those loans, to reduce the EMI amount on them, and free up your income for the home loan EMI.

  1. Ask your parents or spouse to sign as a co-applicant – With an additional co-applicant, the income that can support the home loan EMI increases thus increasing the eligibility for a higher amount. You can also benefit from the good credit history of the co-applicant.

Apart from this, you must keep all the required documents ready. Bank statements, IT returns or salary slips are some important documents that help a bank in establishing your repayment capacity. Show sufficient proof of your ability to pay the EMI. Use the tricks mentioned above and you will surely get approved for a home loan to finance your dream house.


Looking For a car loan? Ask about Pre-payment Penalties

Whenever one seeks a loan there are certain factors that attract a lot of attention, regardless of the type of loan it is. Interest rates is one such aspect, this is what one focuses on the maximum as it is the biggest cost that is associated with a loan. Borrowers may also find out details about other costs like the processing cost and so. However another cost that may arise in the course of the loan tenure, the pre-payment cost is often ignored. Here we discuss in detail about the prepayment cost and why it should not be ignored.

Understanding Car Loan Pre-payment:

Loans are taken for fixed terms as defined in the loan agreement. EMIs are decided based on the loan amount term and the interest rate. However if the borrower has some spare funds he/she might want to pre-pay (pay before the end of the term) a part of the loan or the entire amount due. This is known as pre-payment, it may be partial when only a part of the outstanding amount is paid or it may be full when the entire loan amount is paid before the loan tenure ends. When the entire amount due is repaid by the borrower it is known as foreclosure.

Prepaying a Car Loan: Charges

The borrower may assume that prepaying a loan would be a good thing as they would save their interest cost and the lender would also be happy to receive the amount earlier than anticipated, however this is not the case. Based on the loan amount, car loan interest rate and the tenure the lender anticipates certain cash flows over a time period, so when the borrower repays the entire amount or a part of the amount earlier than expected then the lender faces loss of interest for the said period. To compensate for this loss in revenue the lender may charge a pre payment penalty. This penalty may also be a tool to dissuade the borrower from prepaying a loan.

All lenders may have different rules regarding prepayment. Some may allow pre payment only after a certain time period has elapsed and the charges also vary from one lender to another. It is important that before signing your loan agreement you get clarity on the charges and also the conditions related to loan prepayment. This will save you from getting a rude shock when you decide to pre pay a loan and will also help you in making an informed decision when planning to prepay a loan

Should You Prepay a Car Loan?

This decision will depend on a variety of factors, the first being the cost of prepaying a loan versus the savings. Prepaying a loan involves certain cost (prepayment penalty charged by the lender) and when you prepay a loan you save some amount on the interest. It is important that a cost benefit analysis is done before reaching a decision.

Also factor in the opportunity cost, if you do not use the spare funds to prepay your loan you could invest this amount elsewhere which would get you returns. Compare the savings made by prepaying the loan with the interest that you would have earned by investing it elsewhere before reaching a decision on prepayment. Another aspect to keep in mind is that foreclosure will impact your credit score negatively in the short term. Details about all loans are mentioned in the CIBIL Report and the details about foreclosure will also be included in it.

Getting a new vehicle is pretty exciting but it’s essential that when you are seeking a loan for buying you find out about all the nitty-gritty that goes into the loan agreement including the pre payment penalty.

Guideline to Manage Your Personal Loan EMI

When your savings are not enough to meet your immediate financial needs, when friends and family are not approachable, when you do not have any asset to provide as collateral, personal loans provide a sigh of relief. Personal loan interest rate is usually lower than the credit cards. It provides flexibility of usage, so you can depend on it for your child’s education, marriage, renovation of house or paying medical bill. A person with a stable income and good CIBIL score can easily apply and get approved for a personal loan. But like any other loan, personal loan is a big financial responsibility that needs to be managed well. One needs to follow strict discipline to pay off the debt. A slight mismanagement will not only put you in a debt trap but also hamper your credit score.

Here are a few pieces of advice that will help you manage your personal loan wisely.

Weigh different options

Before you take a loan, do a proper research and weigh different options to select a lender that offers the best interest rates. High interest loans translate into high EMI payments that may affect your cash flows. To make sure that your EMI is easy on your pocket, pick a lender that offers a good deal. Check your credit score before filing a loan application. If you have an excellent score, you can use it to your advantage and bargain for good deals.

Make sure that the loan is affordable

Before signing the loan application use an online personal loan EMI calculator to find out the EMI that you will have to pay every month. It is a simple tool that helps you view the EMI for different loan amounts, tenures and interest rates. Make sure that you have the financial ability to make payments on time every month. Fixing a budget in advance will help prevent any missed due dates in future. Your payment history is taken into consideration during CIBIL score calculation. Timely payments will improve your score and make it easy for you to seek financial assistance in future too. So if you cannot afford the EMI, it is wise to reduce the amount of loan that you take or extend loan tenure to avoid any possibility of defaulting.

Be mindful of deadlines

The most important factor that affects CIBIL score calculation is the payment history. Your payment behaviour gets recorded in the credit report and determines your creditworthiness. So never skip or delay a payment. Plan your payment in advance to avoid last minute panics. Set reminders so that you never forget the deadlines. You can also set automatic payments, so that the amount gets deducted from the bank directly.

Contingency fund

The total EMI of all your loans should not exceed 40-50% of your income. You should not only keep aside funds to meet your monthly expenses, but also keep a reserve amount that will help you during emergencies. Such reserves come in handy when there is a medical emergency or a job loss. It helps in preventing defaults on EMI payments during such situations. Defaulting not only makes you liable to pay extra charges but also pulls down your CIBIL score. So creating a contingency fund is always beneficial.

Make additional payments

If you receive any extra amount during the year like gift from friends or family, annual bonus, proceeds from a matured FD; use it to make an additional payment towards the loan. This will help in paying down the loan faster and also save on interest costs.

Increase EMI amount with a rise in income

With every increment that you receive, you must also raise the monthly instalment that goes towards the loan repayment. Do not splurge all the extra income that you receive. Increasing the EMI amount will help you save a huge amount on interest costs.

Lastly, make some adjustments in the spending habits to ensure that you can have a higher amount to pay for EMIs. Cut down on luxuries and unwanted expenses. Avoid taking any new loans or charging huge expenses on credit cards. Be responsible and ensure that you have sufficient balance in the account before you issue a cheque for the EMI payment.