Tag: home loan

How to choose the right home finance company?

Owing to the rising prices of property, availing a home loan is one of the crucial steps when you plan to build your dream home. A lot of comparative analysis goes around when you consider factors governing the decision to choose the right bank or financial institution.

While you finalise a residential property and search for a lender to back your purchase, it is equally important to have a clear picture of your financial state in your mind. Your CIBIL score undeniably plays a significant role in your loan approval. In case you find that, your cibil score is low; the first step would be to search for a home finance company that offers home loan despite poor credit history.

While there is no denying the fact that you should compare the deals by different lenders before making the decision, there are several other aspects you need to keep in mind.

Loan Amount: With robust credit score you can avail loan for up to 85 percent of the property cost. The lender would consider your disposable income, property value, age, occupation, credit history, and number of dependants before finalising the loan amount. The more the lender approves, the lesser would be your down payment, but it would attract a higher EMI. If higher EMI is not a concern and you do not want to spend too much from your pocket as down payment; choose the lender that approves a higher loan amount.

Rate of Interest: Home loan interest rate is something that would influence your monthly instalments. Conduct a methodical online survey for rates and select the most competitive one. Have a proper understanding of the Retail Prime Lending Rate (RPLR) before sealing the deal. For banks, the lending is higher than or at the base rate as they cannot lend lower than the base rate. The housing finance companies give a discount on the RPLR. Understand it carefully and pick the right lender.

Consider the hidden costs: Most of the times applicants overlook the hidden costs like processing charges, document charges, administrative fees, repayment charges, switch fees and verification charges. It is important to collect all information about the charges before choosing the HFC.

Property type and location: There are HFCs that do not fund in specific localities and they even do not fund every property type. Confirm if the lender you finalize authorises loan in the locality of your choice.

Loan span: To increase your eligibility, banks offer home loans for up to 30 years. Housing Finance Companies generally do not grant a 30yrs loan.  Confirm the loan span while applying.

Disbursal & Processing Speed: It is important that you choose a Housing Finance Company which rule out the possibilities of delays when it comes to approving a home loan application. With right documents and verification reports, it should not take more than 10 working days to process the home loan application. An additional 3 working days generally for the disbursal of the sanctioned amount.

Reliability of the HFC: Home Loan is a long term commitment. Furthermore, you have your title deed mortgaged with the lender. It is, therefore, exceedingly essential that you choose a reliable lender. Reliable HFCs would always offer good customer support and flexibility. Confirm the dependability of the financial institution if you do not have a preceding relationship with the organization.

Credit history and records

It would be to some extent difficult to get hold of a housing loan in case your credit history is not up to the mark. Searching loan for low Cibil score is always a challenge. However, all doors are not closed. There are few housing finance companies that agree to offer housing loans despite your poor credit record. If you have a poor score first try to improve it so that it doesn’t affect the interest rate. Banks are too demanding in authorizing housing loan to an individual with poor credit history. The loan for low Cibil score not only attracts high interest rates but lenders put restrictions on loan period and guarantors.

You are recommended to go through all these aspects and keep these pointers in mind as you move forward to choose the best lender for your home loan. Do not hurry things up. Remember repaying a housing loan is a big liability and you should do your homework carefully beforehand to keep away from future hassles.

Want to increase your Home loan eligibility?

Planning to buy a house? After accumulating all your savings still find it difficult to buy your dream home? Try considering home loans. They give you a helping hand buying your dream space. So how will you prepare yourself for a home loan?

Here are a few points to consider when considering a home loan;

Clear existing loans and credits

If you are applying for a home loan you should first try clearing all your outstanding debts and increase your savings on paper. This will give you a helping hand in terms of increasing your home loan amount and get the maximum out of it.

For Example: if you have a car loan running on your name chances are, that your EMI will be around five to ten thousand rupees. When it comes to a this loan the EMI structure ranges from 900 to 1200 rupees per lakh for different banks like ICICI Home loans, or HDFC home loans or DFHL Home loans. If you’re clearing your car loan while applying for a home loan, you will be automatically appreciating your loan amount to at least five to ten lakhs.

Reduce Credit Utilization

Try not to spend money while considering taking this loan. It can be one of the critical points when it comes to credit worthiness. Put your savings in place, if you find difficult to save money try investing in fix deposits and other financial products. This will give the bank or the financial company an understanding on your financial status and your spending patterns. The more you save the more you have chance to gain trust of the bank.

Avoid Job Change

When you apply for a bank loan the bank not only checks your financial status but also checks your employment patterns. You will be asked about your employment status and the total years of experience. You need to be in a particular company at least for a couple of years when considering home loan .If you have switched multiple jobs in short span of time it’s likely to get your application rejected.

Consider all incomes

If you have multiple incomes which you can show in your bank statement like freelancing jobs, existing property rents etc. try showing all your incomes and gains so that you can boost up your chances of getting a loan and also increase your eligibility for a maximum amount. It can help you be one step closer to your dream house or else you will have to shell out some more money as down payment.

Pool in your spouse
I
f you do not have multiple incomes coming in, you can always take help of your spouse or any earning family member. Many banks consider your spouse’s income as well when sanctioning the loan. There is a fixed pattern behind this, either it should be husband and wife as co-borrowers or it can be father and son. Sibling’s as co-borrowers are not allowed in many cases.

Increase tenure

As we all know these loans are a long commitment, considering government subsidies and offers of low interest rates is always suggested to opt for a long tenure. A long tenure helps you reduce monthly EMIs and live an easy life. If you opt for less tenure the EMI range will increase and that means you will have to work harder for meeting your EMI amounts.

Have a good cibil score

A good cibil score is built when you pay all your dues on time and are financially sound. When applying for this loan if your cibil score is bad then the bank will deny your loan. There are many non-banking financial companies who provide home loans for low cibil score people but the interest rate will be high compared to market standards. Maintaining a good cibil score takes a lot of dedication and cautious moves, so take the steps wisely and maintain the same.

Have good terms with the bank

It is always suggested to do a thorough research on the banks you have shortlisted for a home loan. Always consider that you owe to bank first where you get your salary or keep the savings in. If you are in good terms with your bank, the process gets easy and the home loan sanction is done in no time at all. Choose your banking relationship manager wisely and keep good relations with them.

Taking a home is a huge step in one’s life and loans are one of the ways to achieve what you dream for. You will have an amazing time through the process of getting the loan sanctioned if you adhere simple steps today!

Difference between revolving credit and installment loans

The art of protecting your credit score is perhaps learned over the time. While it is a common knowledge that the credit repayment and credit utilization ratio are the two most important factors touching your credit report, it is rarely understood practically.

Mostly underrated is another calculation factor for credit scores is the type of credit drawn. It indeed affects the score the most and can have a far worse bearing on your credit score.

Very few of us realize that late payment of 2000000 home loan for 10 years would not hurt your credit score as much as the balance of 20000 on your credit card would do. Let’s understand why so?

In simple words the difference is basically due to the difference in the nature of loan. When you draw a loan such as a home loan, a car loan or any other purpose loan you raise credit on installments. These all are examples of installment loans.

While your credit card limit is in the form of revolving credit where in you have freedom to choose your loan and its repayment.

To understand the difference between the two let’s elaborate further on the difference between revolving credit and installment loans.

Basically there are two types of accounts that appear on your credit information report– Revolving credit and installment credit. Any type of loan or credit product would be using any of these repayment methods, none can use both.

Loans with fixed interest rate and duration such as personal loans, auto loans and home loans are type of Installment credit. They are repaid with pre-scheduled payments. They are drawn for a fixed amount at a fixed (or variable) interest rate and for a set period of time. As you repay the Installment loan over the credit duration, principal amount reduces and the loan closes with the full repayment. However the payment on revolving credit is not fixed, it is open-ended. You can repay and borrow as per your requirement up to the credit limit. One of the most commonly used revolving debt line is credit card.

Both forms of debt can be raised as secured and unsecured forms, but commonly installment loans are secured loans.

In the installment loans the duration of the loan is fixed however in revolving credit you never borrow a lump sum amount and thus there is no fixed payment plan or a fixed duration. You can pay in full, partly or roll back the balance according to your convenience.

The rate of interest on installment loans can be variable or fixed. Even in case of variable interest rate the amount paid as interest on installment rate falls under a market range and thus installment loans are never too costly. They are charged as per the market standards and are affordable. There are no surprise factors involved.

However the flexibility of revolving line of credit to repay often takes a toll on credit score.  This flexibility calls for higher rate of interest. In case of failure in repayment, rate of interest can rise even further. The creditor have all rights to increase the rate any time.

So, revolving credit can be said to be precarious for credit score as compared to installment loans. I hope this make you understand why carrying forward the balance on your credit card from one month to the other month drags down your score.

While the regular payment of loans and bills boosts your score by 35 per cent, the exhaustion of credit limit hurts your score by 30 per cent.

When your score tumbles down clearing off credit card balance is one of the fastest ways to improve the score. More so, many a times a professional credit counselor would advise you to draw installment loans to close the revolving credit in order to build your score. Generally personal loans are used to close high-rate revolving credit lines.

It is important to know here that by repaying your credit card balance regularly you can also build good history. It also make you eligible for increasing your limit. As the over usage hurts your score, keeping the credit usage below 30 % also helps your score grow. So you can use credit card limits to increase your credit worth.