So you have zeroed down on the property and are not looking at getting that loan that will help you get into that property as quickly as possible. While the sentiment to start staying into own house is understandable but a thorough check and evaluation of the loan is must. Following are the points that none of the housing finance companies will share with you. So do check out on these before signing the agreement.
Impact of your credit profile
Every organization wants to acquire a good customer. However, the organization will also want to sell the product at a higher price. In case of banks and other lending institutions, they will never tell you that you have an excellent credit profile, or even mention that your credit score is good. If your CIBIL score calculation shows it to 750 or above, you can rest be assured that the bank would want to have you as a customer. In this case, you can negotiate the rate of interest being charged and even the processing fee can be lowered if you speak to them. Of course the banks will not tell this to you. Therefore, checking your bureau report before applying can be a good idea.
Floating rate of interest
Almost all sales guys will swear by the floating interest rates. They will convince you on pretext that the rates charged on your loan will change automatically. While the statement is true, but not completely. While any upward revision in interest gets applicable with immediate effect, a downward application on interest rates does not happen automatically. You may be required to contact the housing finance company and pay a fee to get it revised.
Fixed and floating interest combination
There are banks that offer a mix of fixed and floating rate of interest rate on home loan. You may get to hear that the fixed rate will help you keep the EMI static in initial part of the loan term. The fact remains that even in a floating rate scenario the EMI remains constant. In case there is an increase in the rate of interest, the term may get increased unless you would notify the bank to change the EMI. The change in EMI would since involve representing the NACH (auto debit of EMI from account) the lender may just want to keep the EMI at same level.
Also, please note that majority of the amount being paid in the initial years’ EMI gets adjusted towards the interest. And since the fixed rate is generally higher, it will inflate the cost of loan.
While the bank may communicate the rate of interest but the effective APR (annual percentage rate) may be higher. This could be on account of method in which the interest is getting levied. So you must check on the APR than just the rate at which the bank is going to charge you.
Some banks will not tell you but would charge for insurance. Such approach is unwarranted and you must seek a clear distribution of the charges that the bank is going to levy. Some banks even build it in the EMI and there is hardly any difference in the amount that you shell out on monthly basis. But fact remains that you may be getting charged for a product that may not be needed by you.
The prequalified loan offers keep coming to people who banks deem to be good paymasters. But before you fall into the trap of any such offer, do inquire about the privileges that you would be entitled to as a prequalified borrower. You may just figure out that the terms and rates being offered to you have practically no difference.
You can bargain towards month end
No bank will tell you that you would be better off if you apply for a loan towards month end. Since the banks also have internal targets, the sales people may be able to get you an even better deal if you negotiate the terms towards the end of the month. Do not forget to take the terms in writing from the bank before agreeing to sign the loan documents.
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