MUSTS AND MUST NOTS OF HOME LOANS...

A home loan is the easiest method to take a step closer to your dream home!

After the RBI's downward revision of policy rates by 50 basis points several banks have reduced their lending rates.

Recently, we came across an article on THE HINDU…we would share an excerpt with you.

"Here are a few points you need to bear in mind at the time of taking a fresh loan or evaluating your existing loan structure:

Fixed or floating?

… In the current scenario, however, where the interest rates seem to be in the softening mode, it's best to opt for floating-rate loans. This apart, the differential between the floating and fixed rates -up to 2 percentage points, depending on the lender – justifies the choosing the former.

Don't focus on the rates alone

No doubt, lending rate is a critical factor for choosing a lender. However, the lender offering the lowest rate need not necessarily be the ideal choice. You also need to factor in charges like processing fee, inspection and valuation charges that banks levy.

Insure your property

…It is in your own interest to insure the property – in case it is destroyed due to a natural calamity, you will be left with a home loan despite being deprived of a shelter.

Keep communicating with your bank

Any lender approves your loan application on the basis of your current financial situation. Hence, if there is a change in relevant circumstances, particularly employment status, the banks are interested in being informed. So, be it job loss, retirement or switch, ensure that your bank is kept in the loop."

SOURCE: THE HINDU

We can never be too careful with money matters! 

Especially when it comes to loans -- the answer to many immediate financial needs!

However, with the myriad of loans available in the market, each claiming its competency, how do you ensure you do not end up in a bad debt or a huge loan liability?                   

1) Repayment capacity

It is advisable to accept a loan only if you could afford to repay the regular EMIs while managing your monthly expenses.

2) Disclosing existing loan details

By hiding information, you may end up with a higher personal loan, but it might make money tight, considering commitments to other existing liabilities.    

           

3) Do not sign blank documents

Banks send executives to help borrowers through the documentation process. Never leave a blank signed application for the executive to fill up.        

      

4) Reading the fine print

Very basic -- Read the loan agreement thoroughly.          

    

5) Choosing the right EMI and loan period

The EMI should be managed comfortably each month. A higher EMI with a shorter tenure works more cost effective than a lower EMI with a longer tenure.

6) Choosing your banker

– It is advisable to approach your regular banker for the loan…who would already be familiar with your credit worthiness.                    

      

There is no problem with loans... and loans are not bad… but one should consider various other alternatives to loans such as loan against fixed deposit, gold, shares etc too!