Looking for home finance: Things to watch out for!

With the advent of 7% growth of Indian economy, and ever rising disposable income of our citizenry, people are looking forward for their permanent residential units to attain self-reliance and secure their future. And with the growth of formal banking systems in the economy, availability of cheap credit facilities and home loans through banks and other financial units, there are few things that one needs to consider and scrutinize to benefit most from such facility and thus pay nominal interest with timely repayment of credit to attain possession of property at earliest.

(1)    A diligent research – Due diligence done by the person looking for the loan is a mandatory requirement wherein one needs to check the total interest rate charged, hidden charges (if any) and more importantly the ease of procedures and incentives provided by the bank. In this case one should not simply go as per the instructions of one’s loan agent. For e.g. SBI charges a low home loan interest rates, but due to it paying a minimal amount to its agents, such publicity is not realised, and thus agents often tend to advice against the bank despite its cheap credit facility.

(2)    Additional fund parking – Certain banks allows the borrowers to divulge additional funds to separate accounts thus reducing the interest proportionality, and thus increasing the net disposable interest of the user. Such finance planning may help one to save a lot of interest spending.

(3)    Having a good CIBIL score – have a good credit return history with past borrowings add to one’s CIBIL score, and thus may make one eligible for cheap and attractive loaning facility by multiple banks. Such score if above 750 may provide you with attractive opportunities. An independent data says that 80% of home loans given in India are having above 750 CIBIL score.

(4)    Understanding RBI norms – Since foreclosing has been banned by RBI, one should understand such foreclosure requirement (if any), by the banks to save himself from unnecessary litigation amounting to legal charges and judicial fatigue.

(5)    Processing fees – different processing fees is charged by different banks and thus minimising such fees can add up to one’s disposable income which can be diverted to one’s interest repayment.

In addition to all the above checks which are pre-requisite if one is approaching cheap loan facility, one must also be required to read the documents and terms and conditions carefully before venturing and opting for a particular company, as there might be varied hidden conditions which may in future be detrimental for the user and the property, such as lock in period etc. amount to such hidden practices. Also, increasing the bridge funding and increasing the down payment over one’s loan, may lower the interest rate to be paid on the principle amount, which will surely be financially beneficial for one’s pocket. Also, one needs to strategically learn foreclosing such home loan as earliest as possible to waive him off all the burdening interest. So hurry up, go for home finance, but do keep in mind the aforementioned pre-requisites before approaching any credit unit.