HOME LOAN SIMPLIFIED
- What is CIBIL? : CIBIL (Credit Information Bureau of India Limited) founded in August 2000 keeps a credit score (called as Transunion Score) of all the folks opting for any type of loan from any financial institution. CIBIL gathers and keeps records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by banks and other lenders on a monthly basis. This info is then used to create Credit Information Reports (CIRs) and credit scores which are supplied to creditors so as to help evaluate and accept loan applications. Credit Information Bureau (India) Limited (CIBIL) supplies a credit rating on a scale of 300 to 900 based on your previous credit card use, how you maintained your bank balances, any cheque rebounds, present loans, loan payments and how many times you have applied for a loan or a credit card. The data from banks indicates that loan providers prefer a credit score that is greater than 700. Transunion score is a history of your profile, so do make sure you handle your charge in such a way that your score stays above 700.
- Regulatory Body of Home loans? : NHB (National Housing Board) was established in July 1988 under National Housing Bank Act 1987 as regulating body for all the home loans in India. It is a subsidiary of Reserve Bank of India. NHB was made to create a system of long term home loans, to provide financial aid to house loan companies, to make home loans affordable, to market network of dedicated home finance institutions and also to regulate the housing finance firms. All regulations and rules associated with home loan credit are as per the guidelines of NHB.
While selecting the loan tenure, certain factors need to be considered. The most important factor (MIF) in deciding house loan calculators is net disposable income. Internet disposable income is the money which you are left with after paying for all of the deductions like PF, ESI, Gratuity and Taxes. From this net disposable income the EMI is served every month. If you’ve got a low net disposable income, then long-term tenures may fit you fine. But be mindful in such a case, although the EMI would reduce, you would be paying interest for a longer time period. A loan with a shorter tenure would bring with it charge of lesser interest, but of course a higher EMI. Also while determining tenure things that ought to be kept in mind are equilibrium of Job, odds of promotion or increment, continuity of income, etc..
Interest Rate: There are two versions of interest rate on the industry. One is fixed interest rate concept in which the interest rate and EMI remains same for the comprehensive depreciation of the loan till the period loan accounts is closed whichever is earlier. The next and most frequent type of notion is floating interest rate mortgage. In these residence loans, the rate of interest and tenure of EMI is determined by the base rate of the lending company. Since the base rate changes the home loan interest rate and tenure also changes. Fixed rate home loan are valuable when the interest rates are expected to climb in the not too distant future and floating rate home loans are beneficial when interest rates are expected to fall in close future. - Home loan lenders generally provide 80 per cent of the value of their property as the amount of the loan, subject to your earnings. While assessing the income standards, they do not consider some of your salary slips heads for calculating your net monthly earnings. They simply think about the income heads that can be utilised to settle your loan. By way of example, your LTA and medical allowances are deducted from the monthly net salary you get. You are expected to devote the sum received under these heads for the particular activities they are being provided for. This is one of the reasons why we generally see a difference in the eligibility level quoted in the site and real amount realized once the program is processed.
- Foreclosure/ Prepayment Charges: Previously banks/home finance companies used to charge foreclosure or prepayment charges if the loan is prepaid before due date. Such levy of fees has been detrimental to the interest of debtor because he or she had been hesitant to switch over the loan to take lower interest rate benefits offered by other banks. This system of Foreclosure/ Prepayment Charges was banned by RBI in its own Master Circular on customer services in lender dated 02nd July 2012. This prohibition is only applicable on floating interest rate home loans and not on fixed interest rate home loans. So always remember that in the event that you have taken a floating interest rate home loan you are able to foreclose it anytime you want to without paying any fees.
- Negotiate: Do negotiate your interest rate with your lender. Despite all promises of being fixed, lenders do accommodate up to a couple of basis points. Many times, monetary institutions book their best of charges for loans which should be disbursed fast. So approach them only when you have finalized your property deal and you need disbursement shortly. Most creditors have monthly targets to finish, so if you’re around the end of the month, your negotiating will probably fetch you an attractive rate. Also there’s scope for negotiations in calculating fees and waiver of around 50 percent is achievable when negotiated properly. You will never know, discussions might pay off. “Baat karne se hi baat banti hai”.
- Home Loan Charges: When opting for house loan, you must be aware of other fees that come with this. Bank’s charge processing fees, service fees and administrative expenditures. These charges are a percentage of your loan amount that is really sanctioned to you, rather than on what you really take home. Whenever the EMI’s begin rolling in, charges for swapping post-dated cheques, modifying monthly installation or tenure etc would be billed to you. So check the creditors schedule of fees properly and if at all possible avoid making such alterations.
- Loan Agreement: Don’t be afraid of this bulky loan arrangement. Ensure you examine it carefully, even though it might appear a bit difficult. Your creditor may agree to a lot of points verbally, but it’s what is mentioned on the agreement that finally holds good. Never sign a blank credit record, even if the marketing personnel let you do so. Verify the details filled in your loan record to ensure that the terms are the same as what you agreed.
- The Points mentioned above aren’t the only things to remember. These are the 9 main ones dependent on the personal opinion and experience of the author.