A home loan is a long-term financial commitment spanning over an extended period of time. A single misstep in any part of the borrowing process can cost an applicant mental peace and money. Hence individuals should be aware of the various aspects of a housing loan. This would help them to make an informed decision.
Some tips for selecting the best housing loan
The following are some useful tips for choosing the best home loan:
- Choosing between floating and fixed rates
The floating interest rates vary with the market conditions. Hence, if there is a possibility that the home loan interest rates will decrease in the near future, individuals can consider it. Moreover, the floating interest rates are comparatively lower than its fixed counterpart.
On the other hand, in a fixed-rate housing loan, the interest rates are fixed during the complete loan tenor. It allows individuals to plan their finances better. Once they are aware of the home loan interest they need to pay, borrowers can chalk out a repayment plan to clear the debt faster.
Potential borrowers can also use a home loan interest rate calculator to choose the most competitive rates and favourable deals.
2. Drawing a comparison between various home loan offers
Potential home loan applicants must draw a comparison between various home loan schemes offered by different lenders. Individuals can again make use of a home loan EMI calculator for this purpose. However, apart from the interest rate, individuals must look into other factors to make a particular loan scheme expensive. For instance, processing fees, part-prepayment, foreclosure charges, etc., individuals may need to pay as and when applicable.
3. Opting for an optimal loan tenor
Similar to selecting an ideal lender, opting for an optimal loan tenor is equally vital. A long loan tenor lowers the EMI and hence is a pocket-friendly option. But the interest outgo, in this case, is high. A shorter tenor, on the other hand, implies greater EMI amounts and might prove to be unaffordable. But it reduces borrowing costs. Thus, individuals must note that there are ways to reduce home loan tenure and EMI.
Choosing the correct tenor is of utmost importance as it directly has an impact on the EMIs. Using a home loan calculator would help an individual here as well. Punctual home loan EMI payment would boost an individual’s credit score and enable them to leverage several offers.
For instance, financial institutions provide pre-approved offers, which help in simplifying and accelerating a lending process. These offers are provided on various financial products like loans against property, home loans, and more. Individuals can check their pre-approved offer by providing a few details such as name and contact number.
Individuals can again use a home loan EMI calculator, which would help manage the loan efficiently, leading to punctual EMI payments.
4. Checking external benchmark
The Reserve Bank of India has recently made external benchmarking of loans mandatory to remove opaqueness in loan pricing. This would ensure that the borrowers reap the advantages of falling rates.
The majority of the financial institutions have opted to link their loan rates to the repo rate. Hence borrowers must opt for a financial institution that offers home loans linked with an external benchmark.
Besides, individuals should also check the loan application, approval, and disbursal process to make the process hassle-free. For instance, leading HFCs take minimal timing in loan processing.
By now, you are certainly aware of some highly useful tips for selecting the best home loan scheme. It will help ensure a pleasant borrowing experience.