5 Factors that need your attention when you’re looking for a home loan
If you are planning on taking a home loan, you’re probably already on the lookout for moneylenders and the home loan interest rates that they are offering. However, is evaluating loan schemes on the basis of interest rates enough? The answer is “No”. Here are 5 other factors that also deserve your attention.
- Understand floating and fixed interest rates: Floating interest rates can be defined as interest rates that fluctuate based on the market forces of demand and supply. These rates are volatile and can be particularly high or low at any given time. Fixed interest rates, on the other hand, are usually specified by the lender in an agreement and do not rise beyond a certain point. The advantages of each type of interest rate depends upon the scenario of the market and the economy at that time. Hence, before applying for a home loan, enquire about the type of interest rates offered by the lender and study the market carefully.
- Read up lots of reviews: Every lender will conveniently speak about their services and post positive reviews on their websites and in their brochures. However, these can be easily fabricated and are thus unreliable, unless the lender is well known and enjoys a good market reputation. Instead, look for reviews and testimonials posted online by previous or existing customers of the lender to get a more accurate and credible insight into the overall workings of the service provider, the terms, the reputation, the customer service quality and more.
- Check the prepayment and foreclosure policy: Prepayment involves repaying the principal amount and then paying only the interest over the tenor. Foreclosure involves paying the interest and prepaying the principal together at one time and closing the loan before the due date. Lenders generally have rigid policies concerning prepayment and foreclosure because it causes them to lose out on interest gains over the tenor. Hence, they create various fees and penalties to discourage prepayment. It is thus important for you to know about these policies beforehand, so that you can make a wise decision.
- Check the interest rate systems: With the recent introduction of marginal cost of funds based lending rate (MCLR), numerous lenders have had to implement lower interest rates on home loans. This system lets lenders set an interest rate after calculating numerous costs and also allows them to set a margin of profit. On the contrary, base rate is a system where there is a minimum rate of interest below which a lender cannot charge. You should enquire about the system your lender uses and then make a decision based on your requirements.
- Review your CIBIL score: Before applying for a home loan, ensure that you have a good CIBIL score or work towards improving it if need be. A good CIBIL score is anything above 750 and is likely to get your loan application instantly approved. Any score below 750 can put you into the category of a high risk applicant which reduces the chances of your home loan getting approved.
Now that you know what factors to consider before applying for a home loan, you can instantly apply for a quick home loan at Bajaj Finserv.