Applying for a Home Loan can be extremely simple if it’s approached the right way. A good knowledge of the problems that Home Loan borrowers face can be extremely helpful when you’re applying for a loan for your future home. Handling a Home Loan correctly is an invaluable skill, which can save you a lot of unnecessary effort. Here is a list of some Home Loan problems in India, which you should try to avoid at all costs.

Common Problems Faced by Home Loan Borrowers in India

Invalid Documentation – Poor Paperwork

The first thing you should check when you apply for a Home Loan is your paperwork. Filling up different forms and waiting in long queues becomes an exercise in futility if your documents are not in order. The first step in learning how to deal with Home Loan problems is to find out exactly what documents you need and in what format you need them. Once you know this, keep all your documents ready beforehand and prevent any wastage of your time and energy when you approach the bank for a Home Loan.

Instant Rejection – Watch Your Credit Score

In a lot of cases, the loan application is rejected by the bank even before the process can start. This can occur because of a number of reasons. The common ones are not having the right paperwork and not meeting the eligibility criteria. To ensure that your application isn’t rejected in the first stage itself, keep a check on your credit score and try to maintain a good financial record. If banks feels that your financial credentials aren’t up to the mark, they won’t bother with your application at all.

Conflict of Interest

Fixed rate or floating rate? Even with fixed rates, some banks slip in clauses which let them vary the interest rates after a certain period of time. This could lead to a big problem with your finances at a later stage. Even with floating rates, if the interest being levied isn’t too different from the fixed rates, it becomes disadvantageous for you. Do a thorough market research and look for offers which will not put you in a spot a few years down the line. To get a fair idea of your EMIs and what you’re expected to pay over the duration of your loan, you can utilise the Online Home Loan EMI Calculator by Bajaj Finserv.

The Processing Fee Issue

For most Home Loans, there is a non-refundable processing fee. This means that you pay the bank a fixed amount, which is around 0.25% to 1%, as fees to process your application. And if the bank rejects your application, then you don’t get this money back. Since Home Loans will usually involve large amounts of money, 1% could be a huge number and may burn a hole in your pocket. To prevent this, always check if you meet the eligibility criteria listed by the lender.

Know Your Property’s Worth

The usual down payment rates are 10%-20% of the total cost. If the bank feels that your property isn’t valuable enough, they could increase the down payment and the interest rates offered to you. Get a bank-approved valuator and get the correct estimate for your property. If you still face difficulty, try using NSC, LIC policies and provident funds as collateral to get your loan approved at the rates you are comfortable with.

Sift Through Fine Print

The pros and cons of a Home Loan vary with the lender and the terms and conditions of the loan. Be sure to go through every single page of the offer document and make sure you understand every aspect of the Home Loan being offered to you. Don’t sign the document until you’re sure that it’s the right Home Loan for you.

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