How to Get Personal Loans with Low CIBIL Score Explained

The most accessible type of loan to obtain is a personal loan online. These are unsecured loans, which means that collateral isn’t necessary. They can be applied to a wide variety of purposes. Their documentation requirements are minimal, and their processing times are relatively short. The CIBIL score is often cited as one of the most important considerations when applying for a personal loan. However, let’s look at how to get personal loans with a low CIBIL score in this guide.

Can you get Personal Loans with a low CIBIL Score?

CIBIL score is one of India’s most popular credit scores, provided by one of the nation’s leading credit rating agencies. An individual’s credit score is determined by financial behavior. Credit card payments, loan repayments, and so on are all included. Scores range from 300 to 900, the higher the score, the better the credit history.

Credit cards, mortgages, and other products may not be approved if your credit score is low. Credit scores above 750 are typically considered excellent. Personal loan distributors will more likely approve borrowers with a credit score over 750. A CIBIL score greater than 700 is decent, while a score of 550 or lower makes getting a personal loan difficult.

Eligibility for Personal Loans with Low CIBIL Score

An essential component of personal loan requirements is the CIBIL score. The approval of your loan application depends on a variety of other factors as well.

  • Check your eligibility for a personal loan to learn the loan amount and EMI you can expect.

  • Check your CIBIL score. It is simple to do online. The chances of being approved for a personal loan are higher with a medium or good credit score. Personal Loans with low CIBIL Scores may still qualify you for a loan, but the interest rate will be considerably higher.

NBFCs have more flexible eligibility guidelines than banks and can provide you with Personal Loans with low CIBIL Score. Make sure to explain why you defaulted on a loan in the past if you did so for genuine reasons. Lenders may consider offering you a personal loan low interest if your need is justified – for example, a medical emergency.

12 Ways to Get Personal Loans with low CIBIL Score

  1. Prove that you can afford the Personal Loans EMI payments

Even if you have a low credit score, a personal loan distributor might consider your application if you have recently increased your salary or have another income source. Even if you have a poor CIBIL score, you will be granted the loan to prove to the lender that you have a stable income and job. However, if you demonstrate your eligibility this way, you may have to pay a higher interest rate.

  1. CIBIL score of Spouse

Poor credit history makes it hard to get personal loans, which may not be available anytime soon. The partner of a CIBIL defaulter can help you obtain a personal loan. The CIBIL score of your partner can be used to access a loan. Making your spouse the holder of the combined loan is a simple way to process this. If your partner wishes to apply for a personal loan, they must have an excellent CIBIL score.

  1. Ask for a lower personal loan amount

The lender is more likely to be concerned about lending a high amount with a low credit score. These factors can indicate that you will default on your loan from the lender’s perspective. Suppose you decide to personal loan apply for a less expensive loan. When you take out a loan that is less than the total amount you owe, lenders may feel more comfortable giving you the loan.

  1. File IT returns

Lenders will consider your three years of tax filing as positive evidence for Personal Loans with low CIBIL Scores. If your income drops in a particular financial year, you should still file your IT returns since they serve as proof for future loan applications.

  1. Provide employment proof

Do try to provide a letter from your employer detailing your employment history. The lenders are more likely to approve your loan if they find that you have been continuously employed.

  1. High Income

Despite being a CIBIL defaulter, a candidate with a high income can obtain Personal Loans with a low CIBIL Score. A personal loan is possible since your high salary qualifies you to repay the loan. Candidates with higher payments tend to be more trusted by banks than candidates with average incomes.

  1. Apply with a co-applicant or secure a guarantor

Even if your CIBIL credit score is low, a co-applicant or guarantor can help you get a personal loan online. You will need to inform the other applicant beforehand because the latter must complete KYC procedures and provide signatures. Co-applicants and guarantors with a steady income and good credit ratings will have a greater chance of getting approved for Personal Loans with low CIBIL Scores if they find out that they were co-applicant or guarantors.

  1. Have a decent bank balance

An account with an almost zero balance is not acceptable for lenders. So, it’s essential to prove to the lender that you don’t live beyond your means and live a modest lifestyle.

  1. Correct mistakes in your credit report

There may be errors in your CIBIL report. It usually happens when your record has not been updated with the latest information. The credit score can be adversely affected by mistakes like these without your fault. You must therefore check your CIBIL report regularly and make any necessary corrections in order to apply for Personal Loans with a low CIBIL Score.

  1. Request your lender to consider your case with a NA or NH in your credit report

In such circumstances, your CIBIL report may not contain a credit score. To improve your credit inactivity, you can approach your lender. However, this loan will likely have a high-interest rate because the lender may charge a higher interest rate.

  1. Know the Relation Between your Employer and Lender

There might be a possibility that your firm has tie-ups with the lender if you work for a reputable company. Therefore, even if you have a low CIBIL score, the bank may offer you a loan in this situation.

  1. Collateral loan

Getting a secured loan may be an option if you cannot get a personal loan. Collaterals such as gold, fixed deposits, and land can be used to secure loans with low credit scores.

Key Takeaways

Even with a bad credit score, these measures are certainly helpful in getting you a personal loan. However, if you can’t pay back the loan on time, it won’t work. In addition, you will further damage your CIBIL score if you default on the loan. As an alternative, you may be able to obtain a loan against your property if you are unable to get a personal loan. Personal Loans with low CIBIL Score are often difficult to obtain. Therefore, you should take measures to improve your credit score.

Steps to Increase your CIBIL score

  • Make sure personal loans EMI payments are made on time, and outstanding debts are paid. Missing an EMI payment will lower your CIBIL score, and you will have to pay the penalty.

  • It is important not to close an old credit card account because it represents a long and strong credit history. Credit history is also a factor determining your credit score, so if you do not have another long-standing good credit account, your score will drop.

  • Choose repayment terms that are comfortable for you. In that way, you can pay your EMIs on time.

  • A minimum of loans should characterize a fixed period as your credit score is pulled down due to multiple credit inquiries against you over a short period; applying for credit again and again can decrease it.

The following measures will enable you to obtain Personal Loans with low CIBIL scores. Nevertheless, you should make sure that you have adequate funds to repay the loan. Otherwise, your credit score will plummet. This can be done with the assistance of a Personal Loan Calculator so that you can prepare your repayment in advance. You can also consider pledging assets such as jewelry or property as a last resort to get a personal loan.

Home Loan Moratorium – Everything You Need to know

A moratorium, though the term was there for a long time, it has become a buzzword when the Corona pandemic hit us hard in 2020. Economies around the world were closed, and we all witnessed a sharp decline in incomes and businesses.

People had less money, and Government came forward with a Moratorium and restructuring of loans to provide some relief in these distressing times.

We will explain all the relevant aspects of the Moratorium, RBI measures since the first lockdown imposed on 23rd March 2020, the difference from the restructuring of the home loan, and everything you need to know.

What is Home Loan Moratorium?

According to the Oxford Dictionary, Moratorium is putting a temporary pause on an activity by an official agreement. In terms of home loans in India, RBI decides Moratorium for loan borrowers.

In other words, borrowers will not be defaulters if could not pay EMIs during the Moratorium tenure. RBI decides the period, and lenders implement the procedure. If you have taken a Moratorium or will apply for the same, you should know that this reflects in credit score details but does not affect your eligibility.

Loan Moratorium 1.0 in the year 2020

In the wake of the pandemic, the Reserve bank of India declared Loan Moratorium 1.0 for three months between 1st march 2020 to 31st May 2020. Later the tenure was extended by another three months up to 31st August 2020. Borrowers were allowed to apply for the Moratorium by December 2020.

RBI offered the first Moratorium as part of the loan restructuring scheme 2020 and allowed the extension of the home loan Moratorium up to two years.

Note: The Hindu published a report from the Centre for Monitoring India Economy that India experienced one of the highest spikes in unemployment from under 7 per cent in mid-March to 27.11 per cent in the first week of May 2020.

The premise of the First Moratorium

  • Unprecedented unemployment situation India has ever faced after the Independence

  • Closure or extreme losses of businesses across the country due to complete lockdown

  • No income led to loan defaults, psychological pressure on borrowers, financial commitment etc.

  • To save the day, RBI announced Moratorium 1.0 in March 2020 to give the much-required time extension to repay home loans

Key Highlights of Moratorium 1.0

Loan Moratorium Period: 1st March to 31st August 2020 with a provision for an extension of two years

Eligible Loans: Home Loans, Loans on Credit cards, and all other EMI based loans

Eligible Applicants for Moratorium: All borrowers

Mode of Application: Online and Offline

Status of the Moratorium: Moratorium 1.0 has closed and lenders are offering to restructure the scheme

Loan Moratorium 2.0

To help small businesses and home loan borrowers still distressed due to continued lockdowns, low income, job loss, salary cuts, etc., RBI Governor Mr Shaktikanta Das announced loan Moratorium 2.0 on 5th May 2021.

He announced Moratorium 2.0 through a virtual meet. He said, ‘’Small businesses, MSME, and individual borrowers with an aggregate exposure up to twenty-five crores and have not applied or taken any restructuring benefits earlier, shall be eligible for Resolution Framework 2.0.’’ He further elaborated that banks will decide the inclusion of Moratorium within restructure scheme.

The premise of the Moratorium 2.0

  • Prevalence and stronger second wave of Corona affected lakhs of businesses and jobs in 2021

  • RBI consideration of a plea in the Supreme Court of India for a Moratorium of six months and not to declare loan accounts as NPA due to non-payment of EMIs during the devastating second wave of the Corona.

Eligibility for the Resolution Framework 2.0

  • The loan borrower should not have taken benefits of Moratorium 1.0

  • If applied, existing beneficiaries will get benefits up to the remaining tenure of two years from Moratorium 1.0

  • No loan defaults and bad credit score up to 31st March 2021

  • Understanding between lender and borrower. The reason for delay should be authentic and with sufficient proofs

Recent News and Updates

  • There are no fresh extensions of the Moratorium as of September 2021. Banks and financial institutions are taking an aggressive approach towards loan defaulters and delayed repayments.

  • Medical experts, Governments, and WHO has warned against the arrival of the third wave of Corona in October-November 2021.

Difference Between Restructuring of Loans and Moratorium on Loans

  • The Moratorium can be referred to as a ‘loan holiday’ for a temporary period. It applies to all borrowers. Restructuring is exclusive to the few. It is a process to restore problems in cash flow between lenders and borrowers.

  • The Moratorium can be a part of the restructuring scheme, not the other around. Restructuring is permanent; you restructure the loan to close the account.

  • Restructuring is a win-win arrangement for lenders and borrowers. Moratorium mostly helps borrowers by extension of loan paying term.

Frequently Asked Questions on Loan Moratorium

1) How to apply for Moratorium 2.0?

Answers: Borrowers can avail themselves online or offline mode. The last date for the registration is 30th September 2021, and banks take up to 90 days for the processing of your request.

2) What are the extra charges for taking a Moratorium?

Answer: You will pay ‘interest on interest’. It means during the Moratorium period your interest will keep accumulating and will add with your payable amount after the Moratorium tenure. Because of this, several banks have suggested to no avail the facility and continue EMI payments.

3) How Moratorium will affect credit score?

Answer: According to RBI and Banks Moratorium would not affect credit score.

4) Can I apply for a Moratorium on several loan accounts and banks at the same time?

Answer: Yes, you can. Ask your lender and check their requirements for a Moratorium facility.

5) As an NRI, can I apply for a Moratorium and which bans are authorised to sanction a Moratorium?

Answer: The scheme covers all the Indians including NRIs. All nationalised banks under RBI supervision are participants of the Moratorium scheme.

Concluding Thoughts

A loan Moratorium is an arrangement for extreme financial distress, and you are not able to pay EMIs for business or home loans. It is advisable not to take a Moratorium because eventually, you will be paying much more than the principal because of ‘interest on interest’. Consult your banker and take an informed decision.

Tips to Follow when applying for a Home Loan in Metro City of India

The year 2021 is ripe for people planning to buy a home and applying for a home loan. We are saying this based on a market survey conducted by a leading property consultant in India.

Highlights of the Survey

  • JLL India conducted a home affordability survey at metro cities of India including Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Bengaluru, and Pune. They released their annual Home Purchase Affordability Index on 27th September 2021.

  • Affordability has gone up across the cities on the back of lower interest rates, stable housing prices, low base effect of the pandemic year 2020, and the Government’s initiatives. 

  • if you are planning to buy a home in the metro, the time is perfect as per the survey

  • Kolkata tops the list in terms of affordability. Except for Hyderabad, all other cities in the survey have shown more or less stagnant property prices from 2013 to 2021.

  • The household income of metro residents has increased by 7 to 9 per cent in the last year.

This snapshot of the survey was about why we should buy or construct a home in a metro city. Now we will explain how we should plan an application for a home loan with a loan distributor or a bank.

Tips to follow when applying for a home loan in Metro cities in India

People in the metro apply for home loans for two reasons:

1) When they experience a fund shortage

2) When they do not want to liquidate savings

Whatever be the reason, you must follow tips for the best deal on a home loan and comfortable repayment.

Prime Lending Rate

RBI has announced home loans up to thirty-five lakhs for individuals under prime lending rate. It means banks and financial institutions provide cheaper interest rates for people applying for a home loan in metro cities.

Visit your lender or call them to know the rules and applicability of PLR in your city.

Research about Home Loan Options

We live in a digitally connected information-based society. You will find simply everything on the web. Use the online resources and research about a home loan. Focus on EMI options, Down Payment, and Repayment procedure.

A home loan is a long-term financial commitment. You should take sufficient time to search and learn all the relevant aspects of home loans such as RBI guidelines and impact on the interest rate, charges, taxes, etc.

Affordability Factor

After research about home loans, it’s time to plan affordability. EMIs are monthly addition to your existing expenses, so, you need to do financial planning about over-head cost, contingency funds for long-term up to thirty years.

Budget Control

Budget control is an extension of your financial planning. Once EMI is decided, you have clarity of overhead expenses on the monthly expenses. It is time to control your budget and reduces expenses wherever possible.

Prioritize your expenses, delay expensive work if possible, etc to adjust equated monthly statement. Delaying EMI is highly not advisable because it will impact your creditworthiness adversely. So, spend cautiously and include EMI in the monthly mandatory expenses.

EMI and Down Payment

Equated monthly statement depends upon down payment, lender’s discretion, borrower’s profile, etc. The general rule is your EMI should not exceed 40 per cent of the income.

Down payment varies as per the loan amount. A higher down payment lowers the loan amount, reduces EMI, and eventually shorten the loan period. If you do not have sufficient savings and capital, a lower down payment is advisable because the down payment is only one step towards a home loan application.

So, decide down payment wisely for convenient EMIs and loan tenure.

Repayment Tenure

If you have a stable source of income, strict financial planning, and a knack for savings & investment, always go for shorter loan repayment tenure. A shorter repayment tenure with higher EMI offers a lower interest rate. You become the owner of the house faster with high EMI and saving on the interest rate.

Longer repayment tenure offers more EMIs of smaller amounts but a higher rate of interest. You pay a lot more in interest than the principal capital because of the longer repayment tenure. It is advisable to opt for longer repayment tenure only if your financial condition is not in good shape.

Credit Score

A credit score decides your eligibility for a home loan. Banks and financial institutions prefer a credit score above 700 for your home loan approval. Keep your financial transaction transparent, social profile professional, and avoid delay of credit card bills or any other loan for an acceptable credit score.

Foreclosure Norms

RBI has abolished foreclosure charges on home loans. Keep updated information and follow the Reserve Bank of India on Twitter. They post all the relevant information about loans, investments, etc., on their official Twitter handle.

Additional Charges

Ask your lender about all the applicable charges such as processing fees, penalties and others.

Documents and Eligibility

Make a checklist of required documents and information for home loan applications. Documents such as address proof, ID proof, photographs, property documents, etc., should be updated and ready. Make a soft copy of all documents and save them in a folder on the desktop for a quick upload.

Eligibility criteria remain standard such as Indian citizens, correct documents, personal information, and so on.

Terms and Conditions

After covering all the points and steps, read the terms & conditions carefully. Highlight any point of confusion and ask your lender for clarification.

Concluding Thoughts

A home loan for your dream abode in the metro city needs proper research and understanding. Read the passage and refer to the tips to choose the best home loan for your needs. You should also check comparison websites for different home loans offered by lenders and loan distributors.

A borrower’s checklist for loan against property

A Loan Against Property is a secured loan that people use for personal and commercial purposes. If you want to apply for LAP, there are certain things need to consider before hitting that submit button for the loan.

A loan against property is a long-term commitment. The decision should be backed by a thorough understanding of interest rates, eligibility criteria, documents, market rates from different lenders, etc. We will explain the list of considerations for your reference in the passage, go through the blog and make a sound decision of applying for LAP in India.

What is Loan Against Property?

A Loan Against Property is a collateral-based secured loan. Financial institutions offer LAP against fixed assets, non-agricultural land, and properties. You will find attractive interest rates for LAP because of loan amount security for loan distributors and banks.

Borrower’s Checklist for Loan Against Property in India

Interest rates, Loan Amount, and Tenure

Interest rates decide the amount of money, you are going to pay every month as an EMI. Consider EMIs for fifteen to twenty years, and you will realize the importance of interest rates for deciding on LAP.

Updated Interest Rates of market leaders for LAP Loans as on 7th October 2021

  • State Bank of India offers loan amount up to 7.5 crores for the tenure of five to fifteen years at the interest rate ranging from 9.90 to 11.45 per cent annually.

  • HDFC, leading private bank of India provide loan for the tenure of up to fifteen years at the interest rate ranging from 9.90 per cent to 11.90 per cent per annum. They sanction loan amount as per bank’s policy and decide case-to-case basis.

  • Capital First offers loan amount minimum five lakhs’ rupees to maximum ten crores for the tenure of up to twenty years. Interest rate vary as per company’s policies.

  • ICICI Bank provides loan tenure up to fifteen years. They sanction maximum loan amount of five crores with interest rate ranges between 9.80 per cent to 11.90 per cent per annum.

Eligibility and Credit Score

Check your eligibility for the loan against property with loan calculators. Most banks offer the facility to calculate your loan eligibility on their website and application free of cost.

Submit the property’s value, personal details such as full name, income, etc., and the system will calculate your eligibility based on the lender’s internal terms and conditions.

The second part of the point is the credit score. A good credit score is anything above 700. Keep your financial transactions transparent. Do not default or delay loan payments, credit card bills to maintain a good credit score.

On the checklist, you need to see your eligibility and credit score status.

Financial Planning

Make long-term financial planning. A loan against property is a commitment of fifteen to twenty years. It needs a detailed projection about the future source of income, cumulative EMI amount over the years, and expenses for liabilities.

It is advisable to maintain a contingency fund for unplanned expenses such as a medical emergency. You must have enough sources of funds for EMIs and liabilities such as weddings, higher education, etc.

Personal and Property Documents

Banks and Financial institutions are very particular about property documents and their ownership. There should not be any legal dispute, and the borrower should be signing authority for the property pledged for the LAP.

Any misplaced documents and names could cancel your loan application. Arrange, confirm and re-confirm all the property documents.

Personal documents and information should be updated. Write your full name, ID details such as Aadhar number & PAN, and fill all the columns with updated and correct information.

Check your property document and personal documents to move ahead with the loan application.

Market Research

There are several comparison websites available on the internet. Some of the loan distributor websites also provide a comparative analysis of LAP loans from different lenders.

Search on the web and check interest rates, tenure, and other details. Once find the best quotation, move ahead with the loan application.

Documents Required for LAP Loans in India

  • Borrower’s Identity proof: Aadhar card, PAN, Passport, etc.

  • Proof of Address: Driving License, Voter ID, Aadhar card, etc.

  • ITR Certificate

  • Form 16

  • Account Statement as per Lender’s guidelines

  • Salary slips and proof for the source of income

  • Property documents: Registration certificate, Property Tax receipt, building plan approved by your Municipal Corporation, Sales deed, and any other documents required by your lenders

Significant Facts about Loan Against Property in India

  • Borrowers can include a co-applicant who is a co-owner of the property. You can get a higher loan amount with a co-applicant in the application.

  • There is a provision of top-up loans for home renovation, business expansion on the existing LAP.

  • Borrowers need to consider processing fees, taxes, and other charges as decided by the lender during the loan application. These charges will affect your loan amount, EMIs, and foreclosure. In addition, a GST of 18 per cent is applicable on all banking services and products since 1st July 2017.

Concluding Thoughts

A loan against property is a secured loan. Lenders offer attractive rates because of their risk-free nature. But there is no need to hurry. Go through the blog, follow the steps, complete your checklist before deciding the best loan against property for your requirement and source of income.

Why the 20s is the Ideal Time for Home Loans ?

If you are in your 20s and want to apply for a home loan, there are more chances of approval than in other stages of life. You are young, productive, and years of active working age for paying back the house loan amount. Loan distributors and financial institutions prefer young people with stable incomes as the best candidates for a home loan, personal loan, etc.

We will delve deeper and explain point-wise why the 20s is the ideal time for a home loan in the blog. Read through the passage to know and refer for your purpose.

Advantages of Home Loan in the 20s

1) Early Start Advantage

We start a career after graduation or Post graduation in the 20s. It is the time when our focus on career, business happens to be at its prime. People tend to invest in properties and homes in the early years. But not all of us have sufficient funds to do big-ticket investments, and we need financial support.

Loan distributors and financial institutions provide a convenient route to procure a home loan for your dream house. Especially, financial institutions sanction home loans comparatively faster if you are young, have a stable job or business with a good salary. Take advantage of the early beginners and apply for a home loan at the start of the career or early phase of the business.

2) Longer Home Loan Tenure with Low EMI

Loan distributors and banks decide loan tenure backwards from your retirement age or end of productive age. If a person wants to buy a home loan in the 40s and 50s, their loan tenure will be shorter and equated monthly instalment will be higher. Older loan accounts also consider high-risk in nature.

On the contrary, if you apply for a home loan in the 20s, financial institutions offer longer loan tenure and lower EMI. Risk-factor is low with a young person’s loan account. Approximately, a young person has around forty years of working age, and the maximum home loan tenure in India is thirty years, which means you will close your loan account in the active working years of your life.

3) High Amount of Loan

A customer can get a higher amount of loan in the 20s because of prospects of growth in career, increment or business expansion (if you are a business person). Banks and loan distributors consider your career prospects based on your qualifications, designation, nature of business, years of experience, and projection about the future.

After analysing your profile, they will provide your loan amount eligibility. There are chances of getting a higher loan amount in the 20s with an impressive personal or business profile. Loan distributors offer attractive home loan interest rates if you have a high-paying job, stable business turnover, and a minimum of two years of working experience.

4) Higher Chances of Home Loan Eligibility

Most of us start building our credit score in the early stage of our career and business. People get increment, promotion and rise the ladder of the career or business. Your repayment capacity, stable income, credit score decides eligibility for the loan, and there are fair chances of your good score on all three parameters if you are in your 20s with a good stable source of income.

Plan early in life to enjoy the silver years of retirement. 

5) Fewer Responsibilities and Liabilities

Another crucial advantage of the 20s is fewer responsibilities and liabilities for most people. The time is ripe for making a long-term investment for buying a home because of no other commitments.

The only thing you lacks is experience and enough fund for a down payment. Approach a renowned loan distributor or bank for a safe and secured loan agreement. Do not ever try private money lenders and non-regulated financial institutions.

6) Wealth Creation

You should also see the home as an investment. You are taking a home loan to buy a home that will create wealth. It is more of utilising the fund to make money out of the money. So, along with a place to reside, a home loan for a house can be considered as a wealth creation with the help of financial institutions. 

Take a home loan in your 20s to make an impressive wealth portfolio.

7) Value Appreciation and Tax benefits

The value of properties and houses always appreciate. The cost of the property depends on multiple factors such as market trends, Government decisions & regulations, global trends, pandemics like Covid-19, etc.

Home loans in the 20s avail several tax benefits too.

Things to Consider Before Applying for Home Loan in the 20s

There are certain things to consider before going ahead with the home loan application. If you are ready to follow the below-mentioned conditions, you are all set to start a home loan application to own a home in your 20s.

  • A steady and good source of income for equated monthly instalments without a break

  • There should be enough money left after EMI payment for home expenses.

  • Fund for processing charges, down-payment, and other fees related to home loan application

  • You have a good credit score and no cases of defaults or late payments.

  • Though in the beginning, you might have no liabilities, in the due course of loan tenure, there will be marriage, kids, and other family responsibilities.

  • Ready with a financial plan for the entire loan tenure to handle planned and un-planned monetary expenses

Thus, if you are in your 20s with a good source of income through a job or business, this is the ideal time to apply for a home loan. Refer to all the points above, make a long-term financial plan, and own your dream home in the young years of the life.

How to avoid real estate scams

Buying a property is a very crucial decision of the life for an individual. Thus choosing the right seller is very much important for the purchase of the flats. Also, most buyers have to avail of home loans to purchase the property for which the amount needs to be repaid along with the installment to the lender. Thus buying a disputed property may result in a major problem for the buyer if any stay arises on the project. The bank also thoroughly verifies the land records and also property documents before the approval of the loans. In case if the loan is sanctioned for the housing project and the stay occurs on the housing project, then, in that case, the borrower would still have to either repay the loans or else may come in the defaulter’s list. The bank or NBFC can again allot the defaulters of home loans as it is noted into the CIBIL system that the applicant is a defaulter of loans. Thus being cautious about booking a flat in a housing project is very much necessary. The housing project should be approved by the plan sanctioning authority or the municipality if necessary.

Before proceeding ahead with the flat booking, the buyer should ensure that the land is available with clear titles, the project must have got approval from the plan sanctioning authority, and the real estate developer should be financially stable. During the acquisition of land, there should not be any disputes in the land; if there are some property disputes related to the property share, then, in that case, the land should not be acquired from the seller. Also, while acquiring a plot or a resale property, there should not be any loan pending on the property. Keeping in mind all these parameters can help an individual avoid scams happening and save from fraud. There have been various controversies in real estate, due to which various cases are lodged in the court related to civil disputes. If the property buyer gets trapped in some property disputes, then, in that case, it may take long years to get the issue resolved and get justice. Thus it is better to be alert before investing in the property rather than in a later stage getting trapped in some controversies.

Following are the steps to be followed in detail to avoid any scam while purchasing the property

  • Check the land records before entering into any deal:

If the buyer enters into a deal to buy a plot, then, in that case, the buyer should check with the property documents thoroughly and check with the records with the municipality for the same. If the land records are found to be proper, only then that case the buyer should proceed ahead with the purchase of the land. Also, in the case of booking the flat, the borrower has the right to check with the documents before required from the real estate developer. Else the buyer can even check records in the municipality office for the same. And after confirming the same only, the buyer should move ahead with the transaction.

  • Check for the reputation of the builder and also financial records of the builder:

Before booking the flat, the buyer should verify the reputation of the builder. Also, the buyer should check with the website of the builder and check if any disputes have occurred or not in the previous year’s which can be known through internet articles. Also, the financial condition of the builder should be checked to avoid stay occurring on the project.

  • Check for the approval of loans:

The property buyer should check whether the project has been approved or not by the bank. If the bank approves the project, it shows that the real estate developer has got the project’s approval for construction, and all the land records are clear. Thus then, in that case, there is no problem in proceeding ahead with the booking in the project.

  • Check for co-ownership in the plot or a flat:

In case of the customer wishes to buy the plot, there should not be any hidden ownership through inheritance as it can lead to controversy in the property. At least if there is ownership, then, in that case, the land multiple owners should be disclosed by the seller during the transaction. In case of purchase of flat or even in case of plot, the multiple owners should be disclosed.

  • No debt be pending on the property:

The property buyer should ask for a loan completion certificate if the property is purchased on the loans then. If the seller shows the proof of the loan repayment letter, it proves that the seller has cleared the loan.

Thus all the above parameters should be followed by an individual before proceeding with the property transactions. Doing a thorough check of the property documents can help an individual avoid any disputes in property purchases.  


Home Loan Guide for the First Time Loan Applicants

House is one of the three core necessities of life after food and clothing. Buying a home involves the family’s security with substantial financial investment, and most of us require financial support to fructify the dream of a ‘home sweet home.

To fulfill the need of prospective homebuyers or homemakers, banks and financial institutions extend house loans under specific rules and conditions. As a first-time homebuyer, you must clearly understand different aspects of home loans, such as eligibility criteria, tenure, interest rates, moratorium, restructuring, and so on.

Therefore, we will delve deeper into the home loans, requirements, and steps for first-time buyers in the following paragraphs.

What is Home Loan?

A Home loan is a specified amount of money borrowed by an individual at a pre-fixed interest rate from a bank or financial institution. The loan amount should payback through EMI (Equated Monthly Installments) within the tenure given in the home loan agreement.

: People apply for a home loan to buy a new house or build a home, or for renovation purposes. The tenure spans a maximum of up to thirty years.

Crucial Facts

  • Suppose you have taken a home loan against property and fails to pay EMIs within tenure. In that case, the lending body has the authority to recover their money through selling your property that was pledged as collateral.
  • On average, people commit around 40 to 45 percent of their annual income to pay EMIs on home loans for twenty to thirty years.

As per RBI guidelines, banks and financial institutions cannot charge prepayment penalties on home loans.

Tip: Always pay EMIs on time. Plan for a long-term financial commitment before applying for a house loan in India.

Advantages of Home Loan

  • Property experiences an appreciation of the price in the long-term
  • Timely repayment boosts your credit score and helps in getting new loans and credit cards.
  • Tax benefits on interest amount during the construction phase, principal amount, stamp duty, and registration.

Tip: If you buy a home loan for the first time, apply for a joint home loan with your partner to avail more tax benefits.

Steps to Apply for Home loan

First-time buyers can apply for the home loan against property or according to their annual salary or income.

1) Check eligibility, decide loan amount, EMI, and repayment tenure

The first thing before applying for a home loan is to decide your financial situation. Ideally, your monthly repayment should not exceed sixty to sixty-five percent of the annual income after taxes.

Check your loan eligibility with different ages and tenure. Choose the shortest term to save on the total payable amount because the longer the assignment, the more you commit to paying.

Inform the lending body about your financial commitments and liabilities. If you want to borrow more money, there is a provision to add up to three earning members of the family.

As per RBI, the loan amount can not exceed 75 to 80 percent value of the property, so make arrangements for the rest before applying for the home loan.

2) Approval Status for builder projects and resale properties

If you are buying a home in a builder’s project or a resale property, check the following requirements beforehand:

  • The resale property should be registered with the name of the owner. All documents regarding the property should be in order.
  • For builder projects, check the project’s map, permissions, approval status, etc.
  • Banks do not grant loans for properties in the gram panchayat area or projects without maps.

3) Decide on floating or fixed rate of interest

Industry experts always go for floating interest because of zero prepayment charges; trends are sowing downward graphs for the rate of interest.

Floating rates are perfect for people who cannot afford extra expenses over fixed monthly payables.

Check with your bank and decide after comparing different interest rates.


4) Foreclosure, Prepayment, and Moratorium Considerations

Go through all the details regarding charges on home loans to avoid surprises in the later stages of repayment. Select a lender that does not charge a prepayment penalty.


5) Things to Consider for selecting the lender

Do not go for the first bank you come across on the web or through referral. Make a thorough comparison of the different rates of interest. Talk to customers who have availed home loans previously (if possible), customer support, rules regarding restructuring, and turnaround time.

After getting the best offer, apply for a home loan to buy or build your dream abode. Applying does not assure approval. Home loan approval depends upon multiple factors such as age, gender, income, credit score, age of the property, etc.

To get the best offer, build and maintain a good relationship with your existing. Banks trust old customers for home loan approvals.

Personal Loan vs. Loan against Property – Which is the Best?

We often find ourselves in situations where we may need money instantly for either setting up or expanding a business, paying high education fees for children or meeting wedding expenses. At such times, we tend to explore the options of either a personal loan or a loan against property. Instead of making a decision in haste, it is better to give much consideration and understanding to the crucial factors involved in the process.

What is LAP?

As the name itself suggests, a Loan against property (LAP) is a loan disbursed against any collateral over a commercial or residential property. It is a secured loan sanctioned against an immovable asset such as your property. Going for a loan against plot boosts your possibility of securing a higher loan amount than a personal loan. You can apply for a loan against property online which makes the entire process hassle-free with minimal documentation.

What is a Personal Loan?

A personal loan on the contrary refers to an unsecured loan that is disbursed by the bank without any mortgage of the property as security or any collateral. People usually go for personal loans for lesser financial requirements in comparison to LAP.

Here are some comparisons of the key parameters about getting a personal loan against property vs. a personal loan.

Features of LAP

  • Interest rate

The mortgage loan rate is usually offered between 8-22 percent per annum. This interest charged is lower in comparison to that of a personal loan because you are using your property as collateral. Secured loans usually attract lower interest rates. Moreover, when you avail of a loan against a property online, you can choose from either fixed or floating interest rates. If you are applying for a loan against a property online, then you can as well as an EMI calculator for a loan against property to estimate the EMI applicable to you.

  • Loan tenure and amount

Although you can opt for a loan against property online for small amounts, you need to go for it if you are looking for a higher loan amount. The repayment tenure of a mortgage loan is usually between 5-15 years. Moreover, as LAP is secured against a physical asset, the loan amount sanctioned would be 40-70 percent of the property being used as collateral.

  • Processing fee

In the case of a loan against property, the processing fee charged varies from 0.5-1.5 percent of the loan amount. You can check the processing charges of a loan against a property online from the lender site.

  • Time for loan processing

If you are looking for a loan against property Mumbai, the approval time is longer due to the diligence procedures involved in the process. Verification of property-related documents and other formalities consumes a lot of time. It would take about a fortnight for the entire procedure. However, if you apply for a loan against property online, the process will be initiated at a quicker pace.

Features of personal loan

  • Interest rate

A personal loan attracts an interest rate in the range 11-40 percent per annum. As personal loans are unsecured, they attract a high rate of interest. Moreover, the interest rate also depends on your credit score and your earning potential.

  • Loan tenure and amount

A personal loan on the other hand lasts for 5 years thereby making it a preferred choice for lower loan amounts. The maximum disbursed amount under personal loans is usually lower and doesn’t exceed 25 lacs and depends majorly on the income.

  • Processing fee

For a personal loan, the value varies from 1.5 percent to 2.5 percent.

  • Time for loan processing

A personal loan requires far less documentation and procedures and is usually approved almost instantly. All the lender does is evaluating your credit score and monthly income to provide approval. You can have funds with you within a week.

Why LAP is a better option?

The greatest benefit of opting for a loan against property is that you can avail a loan on it while continuing to enjoy the ownership at the same time. It allows you to tap into the locked-up value in the property you hold. The borrowers can utilize the money for various personal as well as for commercial purposes such as meeting sudden medical expenditure or setting up a new venture. You can avail loan against property online easily by furnishing all the relevant information as requested by the vendor.

A loan against property online is currently in high demand as you can avail a large sum which amounts to about 70 percent of the property value. Also, there is flexibility over the payments and the interest rate is much lower in comparison to a personal loan. As the repayment tenure is long, the EMIs charged are significantly lower. Furthermore, tax benefits can also be availed on the interest amount for a loan against property, which is not possible in the case of a personal loan.

In Summary

While both personal loans and a mortgage loan against vacant land or property come with their own set of advantages and disadvantages, the applicant can decide which one to opt for on the basis of convenience, the interest rate on offer, the amount sought, and also on the processing time. You can opt for a loan against a property online depending on the quantum of finance you require. Assess your needs before applying for a loan against property online.

Difference between Good Debt & Bad Debt in home loans ?

An individual or a corporate that avails home loans from the bank is known as debt. The amount which is pending to be paid to the bank is known as debt. If the borrower can repay easily, the debt is known as good debt, while the debt which the borrower is unable to repay easily is known as bad debt. Having a good debt is a healthy sign for an individual as the borrower avails loans for the betterment of livelihood and also can enjoy the benefits it, for example, if the home loan is availed then it shows that without having sufficient amount in bank balance, the borrower can buy their own house and are repaying the installments from time to time as and when the salary gets credited. At the same time, bad debt means that an individual can avail of the loan, but the borrower cannot repay the loan amount. The consequences of the bad debt are that the borrower may have to vacate the property & also, the CIBIL score of an individual may get spoilt due to the bad debt.

The individual with a good CIBIL score who can repay the installments on time can enjoy the benefits of the good CIBIL score. The benefits of a good CIBIL score are that the individual can easily avail of even future loans and any other kind of credit like credit cards or other financial products like personal loans, business loans, or car loans. Banks are keen to provide loans to borrowers who are financially stable and are in a position to repay the debts on time. The banks charge a penalty to the people who are into bad debt as the delay in payment of installments can lead to a penalty being charged by the lender. Bad debt also affects the balance sheet of the lenders as the non-performing assets of the bank increase. Good debt can also lead to an income tax rebate which the borrower can avail. During tax filing, the borrower has to show the receipts of the loans installments being paid, and thus that tax benefits can be availed. While as in the case of bad debts, tax benefits cannot be availed as the borrower defaults the installments. Bad debt usually occurs when the individual has poor financial planning or else due to job loss, or a loss suffered by an entrepreneur or else in the rare case can be willful defaulters as well.

Features about good debt in home loans

If the home loan is availed for the purchase of the property while having a sufficient amount of money in a bank account and also if the borrower is having a sufficient amount of salary to repay the debt, then it is known as good debt.

· Improved credit score:

If an individual can repay the loans installment on time, then an individual’s CIBIL score improves. Thus, this can make it easy for an individual to easily avail loans or any other form of credit by the lender. Thus, having good debt can also make more additional improvements in an individual’s credit score as it helps an individual prove that the loan has been taken and is repaid on time.

· Benefits in availing income tax rebate:

The borrower can avail of income tax exemption under income tax act 80C. Thus an individual has to provide proof of the income tax being filed. Thus in the case of availing exemption also a good debt is beneficial.

Features of the bad debt in home loans

When the value of the building gets depreciated due to becoming dilapidated is also known as bad debt. And also, if the loans have defaulted, then, in that case, it is known as bad debt. The value of the loans which is not recoverable is called bad debt in home loans.

· Spoilt credit score:

The credit score may get spoilt if the loan taken by the individual turns into default or bad debt. An individual, in that case, may have to surrender the property to the bank for non-repayment of the dues, and an individual cannot avail of future credits.

· No benefits in income tax:

Income tax benefits cannot be availed in case of bad debts or the defaulted loans. The income tax department does not provide tax benefits on loans default.

· Spoilt reputation:

The reputation of an individual may get spoilt as in case of default of home loans; no other lender would provide the future credits to the borrower. Even if some lender rarely approves the loan, then, in that case, the interest rates charged could be far higher. Thus the image of an individual gets spoilt. Also, the property for which the loan is being taken may get sealed by the lender, which creates a bad reputation in society.

There is a major difference between the good debt in home loans and bad debt. Good debt is a healthy financial status sign for an individual, while bad debt is a negative sign for an individual. It is always better to have good debt rather than bad debt.

Is it better to invest in properties beyond metros?

Property investment in any part of the country usually does not go to waste, as, in any part of the country, there is a steady rise in the prices of real estate. However, the returns gained more or less at various places may vary according to the region’s development. In other cases, the prices of the property may even decline or else may decline. Thus the investment must be made properly. In metros, there is a consistent demand for housing. While like the other places, the demand may be more or less depending upon the business activity, which may be increase or decline. The investment else than in metros can be beneficial in the tier-II cities, which have future growth potential. The cities like Jaipur, Nagpur, Lucknow, Mangalore, Coimbatore, Indore, Bhopal, Raipur are the ones that have high growth potential. While the tier III cities are the ones that do not have much growth potential as the population, there is declining due to the migration of the people from the smaller towns towards the cities. Also, tier IV and rural places are not worth much benefit.

The other potential area lies in the tourist spots where an investor can gain healthy returns. The places like Goa, Lonavla, Matheran, Pondicherry, Darjeeling, or the coastline of Maharashtra & Karnataka. etc., are the ones which can yield high returns. Many tourists visit these places, and thus the demand for tourism is high. Thus, the property purchased can be used as a holiday home or given for the tourists’ homestay. As these properties are costly, they even yield higher returns on investments. Thus it is also beneficial to invest in tourist spots. Also, home loans can be availed for bungalows, villas, row houses. Etc. The same interest rates applicable for the flat are applicable for the purchase of the flat and the construction of the homes. Thus in case of availability of funds and approval of home loans, it is better to invest in tourist spots or tier-II cities to get good returns on investments. Banks only do not provide loans for the remote or outskirts locations wherein the bank has no network of branches at that place. Looking at investment beyond metros is a better option as the crowded metros surely yield better returns, but looking beyond metros may also yield good returns.

Features of the property investment beyond metros:

  • Lower investment better returns:

The investment in the Tier II cities is lower, and thus better and steady returns can be obtained in the developing cities. The prices of the properties in smaller towns are far lesser as compared to the ones in metros. Thus, investing in the flat as a retirement home or else for pure investment is also beneficial. Properties in smaller towns can be obtained at a lower budget, and also home loans can easily be availed for the same, thus making it easy to buy the house. However, it is not recommended to invest in the places where the population is already on a decline as the prices may not rise in such places like the Tier III & rural towns.

  • Avail larger area:

The houses in the smaller towns are more broad and spacious as compared to the ones in metros. Thus increase in property prices can yield higher returns on the larger area flat, and thus the investment can be beneficial.

  • Easy financing at lower rates:

Home loans can easily be availed at places like tier-II cities and comparatively lower interest rates than metros. Some lenders may charge lower interest rates in places beyond metros and thus can be beneficial. Almost all the leading banks are available in Tier II places, thus making it easy to avail loans easily.

  • Better prospects in developing regions:

Though the prices in metros keep on increasing continuously, they reach a saturation point somewhere. However, the developing towns require lower investment, and the prices may grow more rapidly, thus getting higher percentage returns on investments.

We can conclude that for a property investor, it is always recommended that investing in properties beyond metros is always a better option as the prices of the property are lower thus, an investor can buy the flat even in case of low budget and get higher returns in percentage in the Tier II cities or else tourist spots. However, it is not recommended to invest in smaller towns.