6 tips to consider while taking a home loan

Buying a home is perhaps the biggest investment you can ever make. To this effect, taking a housing loan is the biggest debt that one takes on, and has to repay over a very long period of time. Even if you are able to afford a high down-payment, you end up paying a huge chunk of your income towards repaying your loan. As such, it is very important to approach the right bank for your loan. You have to factor in the interest rates, EMIs, tenure and several other things. Here are a few tips to consider while taking a home loan in India.

Don’t follow your agent blindly: While it helps to have an agent to guide you through the process of procuring the perfect housing loan, you owe it you yourself to do your own due diligence before approaching a lender. Your agent is paid a commission to bring in clients, so he may not always be looking out for your best interest.

Do your research: Compare the various banks offering low interest rates and affordable EMI options. Read up latest articles about the best banks offering the best interest rates. If you are looking for loan in the current market scenario, you can opt for a Bank of Baroda home loan, an SBI, IDBI, or Central Bank of India loan as these banks offer the most competitive interest rates on home loans.

Understand concepts like floating and fixed interest rates: Banks typically offer two types of interest rates; floating and fixed interest rates. The floating rate of interest is linked to the market and it moves in tandem with the base rate. The fixed interest rate on the other hand remains fixed for a certain period as per the conditions defined in the loan agreement. Often, in the long term, the floating rate of interest works out much cheaper than the fixed rate.

Your credit score helps determine the interest rate: Every lender asks you to present your CIBIL or credit score when you apply for home loan. The interest rate you pay on your loan is determined by your CIBIL score. If you have a credit score of 750 and above, lenders can offer you attractive interest rates and your loan is also sanctioned faster.

Compare processing fees: Every lender charges a percentage of the loan amount to process your loan. While some banks charge about 0.5% processing fees, others may charge around 0.35% fees to process your loan. Since the loan amount amounts to several lakhs or even crores, you can save a lot of money on processing fees too.

Understand the foreclosure terms: As per the RBI, banks are no longer allowed to charge any penalties for foreclosure. Foreclosing a loan allows you to get rid of your debt before the stipulated tenure. If you have the provision for it, it is always better to close off your home loan before the tenure.


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