Are you planning for a home loan? Things you should know before applying?

A home loan is a better option to opt for to buy the dream home. The borrower can apply for the long-term duration of loans according to an individual’s need and age. The borrower can apply up to 80% as loans for purchasing a property, while 20% is to be made as a down payment. The loan installment needs to be paid by the borrower on time before the due date failing which the borrower may be charged with a heavy penalty. If the loans being defaulted, the applicant’s property may be defaulted and thus can be sealed. The borrower should submit all necessary documents to the lender to fulfill the loan eligibility criteria and get the loan’s loans sanctioned. The borrower, as per the RBI mandate, should file for ITR returns in case of failing, which the borrower’s loan should not be approved by the lender. The borrower should also have necessary proofs like employment proof, salary slips, and employment letters. Etc.

The borrower’s loan may get rejected if CIBIL ratings are low, or else if the applicant is found to be involved in malpractices, then the loans can be dismissed. The loan terms & conditions should be thoroughly read before applying for the loan as the misleading clauses may lead to the problem to the borrower shortly while repayment of loans. If the borrower applies for the loan from the real estate developers’ approved finance companies, the borrower can get the loan processed faster and efficiently. In case of proper documentation and employment proof, the borrower can get the loans approved within 48 hours. The borrower should opt for a higher duration for loan repayment in case of a lower salary. Otherwise, in case of a higher salary, the borrower should opt for faster repayment to become early debt-free. The honest lenders who repay the loans on time get a better credit score and can get a clear way for the other loan’s approval or credit card approval.

Things to know before applying for home loans:

  • Terms & conditions of the loan agreement:

The borrower should keep a thorough check on the terms & conditions of the loan agreement. The borrower should check all the necessary terms & conditions for the loans before applying or signing the loan terms. The borrower should keep a check on the interest being charged by the borrower, the duration for which the loan is being approved, processing fees being charged, the due date of the loan repayment, the penalty is charged in case of default or other prevailing terms of loans to be applicable. If the clauses are found to be misleading in that case, the borrower should request for changes in terms & conditions of the agreement. In case of the lender refusing to change the misleading terms & conditions, the borrower should opt for another lender for the loans.

 

  • Estimate the repayment capacity against the monthly income:

The borrower should take an estimate of the repayment capacity according to the salary of the borrower. Though on the property valuation, 80% of the loan is being approved by the lender also, the salary factor plays a significant role in the sanctioning of the loans as the repayment capacity of the borrower depends upon the monthly salary of the borrower. The borrower should understand the essential requirement needs to run on the daily expenses as different people have a different standard of living, different needs, different types of liabilities. Accordingly, the borrower should take an estimate of the requirements and therefore only should apply for the loans. Along with the interest repayment, the borrower should take an estimate of the monthly installment to be charged to the borrower and should understand the need accordingly and should avail for the loans as per that.

 

  • Check Past track records of the lender:

The borrower should do a thorough check about the financial condition of the lender. As if the lender files for bankruptcy, the loan, if not repaid, the borrower cannot make the property in his name and gain permanent ownership of the property. The borrower should also not be amongst the misleading lender who may charge the exorbitant rates to borrower charges or any deceptive or hidden charges been taken by the lender. The borrower should check the reviews about the lender, whether good or bad, and accordingly only should take the decision.

 

  • Competitive interest rates being charged:

As per the RBI guidelines, the interest rates being charged to the borrower should be identical. But still, in spite of that, different lenders may assign additional charges to the borrowers. The borrower can check for the prevailing interest rates to be charged by the borrower, which may vary, and opt for the lowest interest rates and also lower processing fees to be charged by the lender. The borrower can thus save money on the interest repayment.

 

Conclusion:

Thus, the borrower needs to thoroughly check with the lender’s overall background whether the lender is stable and amongst the ones who are following ethical practices. The borrower should also ensure that the lender is not indulged in any malpractices or else is involved in recovery through unfair means. The borrower should check with the terms & conditions of the lender and also ensure that they aren’t misleading.

 

How to apply for a loan against the property during bad credit:

The loan against the property is a process wherein the borrower needs to mortgage his/her property documents with the lender to get some liquid cash in hand. In the case of the loan against the property, the borrower’s CIBIL ratings play a crucial role in accepting or rejecting the loans. The negligent person about the installments paid to the bank or the one who delays the installments gets lowered his CIBIL score. While the willful defaulters are the ones who ultimately default on the loans due to which the lender may be forced to take legal action on the borrower. The lender may charge a heavy penalty on the borrower in case of a delay in payments, while if there is a default of payment for a longer duration, then the lender may be forced to sell the borrower’s assets. The loans granted to the borrower have some deadline to repay the loan on a monthly installment basis, beyond which a penalty may be charged to the borrower. Thus it is always expected that the borrower should repay the loan installments within the stipulated time limit.

The process of applying for loans is an easy & more straightforward process. The borrower needs to submit the form filled duly signed by the applicant, a recent passport size photograph, government id proof, proof of income, property documents with clear titles. If the borrower has all the necessary documents, the borrower is most likely to get the loans approved easily and straightforwardly. The borrower who repays credit payments on time can have an excellent or good credit score, while the delayed payment making or else defaulting may lead to an average or poor CIBIL score. The applicants with good CIBIL scores are always amongst the most preferred customers to whom lending financial institutions are preferring to provide credits. Due to the fiercely competitive market, the banks & NBFC are always searching for customers to extend loans. But still, the lenders need to follow guidelines as per the company rules and as per the RBI guidelines. The mandate rule for the loans’ approval is the submission of all necessary documents, submission of ITR returns records, request of CIBIL score ratings to complete the loan process.

Following are the rules for loan against the property even during a bad credit score:

  • Clear previous debts:

The borrower should clear all his debts of the loans before applying for the new loans. In case of further application of loans, the previous loans should be removed by the lender, with no pending dues kept repaying. Once the existing loans’ full & final settlement is done with full dues repayment, the lender can apply for new loans. After clearance of previous debt, the borrower’s CIBIL score improves, thus making a straightforward way for applying for the new credits.

 

  • Look for loans with longer repayment tenure:

The loans being applied with the lender should be of longer tenure, thus reducing the borrower’s monthly installments. When there is a lower liability of installment on the borrower, it is easy for the borrower to repay the loans. The financial institutions are also in need of the higher loans been running to generate more increased volume business through receiving installments from the previous company being developed.

 

  • Keep the amount of the desirable loans low:

The amount needed to be borrowed low; then, the borrower can quickly obtain the loans. The borrower makes more of a down payment and accepts lower credit; the lender may sometimes approve the loans quickly. As the lender’s liability is joint and financial lending companies need more business, they may consider supporting the loans.

 

  • Opt for a joint home loan:

If the borrower applies for the loan on a joint name & if the other borrower is having a good income source and a good CIBIL score, then the loan with a collective term can get quickly be approved. The borrower with joint names can support each other to repay loans, thus making it easier for the refund.

 

LAP for low credit score:

The loan against the property is a safer mode of opting for loans for both the borrower and the lender. As the property documents are already mortgaged, and the loans are approved up to 60-70% of the property valuation only, there is surety amongst the lenders to recover the lender’s total loan amount. The mortgage of property can be used as a security deposit to the lender to recover the bad debt in case of default in payment.

 

Conclusion:

Hence it is clear that if the borrower is applying for the loan against property, then it creates the surety for the lender to recover the loans by the seal of assets. Also, there can be multiple tricks being applied in case of poor credit score by applying for the joint loan, or else repaying the existing installments, apply for lower amount credits to make it easy for repayment or else apply for the more extended moratorium of loans with a short amount of monthly installments making it easier to repay the loans.

 

 

Guide for loan against property

The loan against the property is a process of mortgaging the borrower’s property documents to the lender to obtain some liquid cash in hand. There are specific guidelines that the borrower must follow while opting for the loan against the property. The borrower needs to submit the documents with clear titles to the lender. Also, there should not be any co-owner or any other shareholder in the property. It may lead to conflict amongst the borrowers, making it difficult for the lenders to recover the money from the stressed assets.

Another major thing is that the borrower, even while opting for the loan against the property, should not default on monthly installments as it may lead to penalties being charged to the borrowers. The installments should be paid on time to avoid paying a liability to the lender. Also, the CIBIL ratings of the borrower may get reduced if the borrower defaults on installments. Even the borrower, while opting for the loan against the property, should read all the documents carefully before applying for the loans.

The borrower’s foremost requirement is to have property documents with clear titles, thus enabling the lenders to process the loan to the lender. As per the RBI directives, the interest rates being charged to the lenders should be in a stipulated range only. There is just kind of minor fluctuations in the interest rates being assigned to the borrowers. Still, it is always recommended that the borrower checks for the interest rates before applying for the loans by comparing the interest rates on the bank’s website. The borrower’s CIBIL ratings may not matter so much as the property documents are already being mortgaged to the lender, thus creating a surety to the lender against the recovery. Also, there are one more significant criteria that the lender needs to follow is that the property should not be a disputed one, or based on an illegal encroachment land, or an un-occupied or dilapidated building. Also, there should not be any existing loans running on the current property that need to be mortgaged.

Guidelines to be followed for the loan against the property:

  • Property should be with clear titles:

The borrower should have a property with clear titles to avail the loans against the property. The borrower should not have property being mortgaged in any dilapidated building, illegal encroachment land, unoccupied building, un-authorized construction ones. The flat should not have any co-owner as it can result in disputes amongst the property, making it difficult for the lender to sell the assets and complete the property’s recovery. The borrower should have the property with proper documents, clear titles & preferably property been available in good condition, which can be readily saleable. Also, the property is based in a prime locality can be given higher preference by the lender to extend loans as it is easy to monetize assets rather than the property found in the outskirts.

 

  • Interest rates being chargeable & other clauses:

The borrower should keep the check on the interest rates being charged to the borrower. The borrower should compare the interest rates being charged by other leading financial institutions and try to negotiate the interest rates being charged by the banks or opt for the competitor’s loans. The other guidelines are related to the banks’ processing fees, penalties being charged in case of delay in payments, and the due date by which the borrower is expected to pay the installments to the banks. Also, all other terms & conditions should be thoroughly checked by the borrower before the loans’ processing. If the terms & conditions are mentioned in such a way that all the conditions are in favor of the lender, then the borrower should challenge the terms & conditions. For example: If the words contain the penalty would be charged against the loans’ early repayment. Then the borrower can oppose the state as the early repayment should not be penalized to the borrower. And instead, they should be encouraged to help the borrower become debt-free in an early stage.

 

  • Moratorium of the loan:

The loan moratorium should be so that the borrower should be able to easily make the installments’ repayment. According to the need, the borrower can repay installments in a faster way to the lender to become debt-free from the loans. In another case, the borrower can opt for the higher moratorium of loan duration in order to reduce the monthly liability of installments on the borrower. Long-term debt repayment maybe sometimes be beneficial in the case of lower salaries. In comparison, as in the case of a higher wage, the loans can be repaid in a faster way to become debt-free or to even benefit from the lower repayment of interest.

 

Conclusion

The borrower should thus check the guidelines regarding the loans being applied for should check with the terms & conditions of the borrowing. The borrower should keep all documents required for processing the loans to be presented to the lender. The borrower should also request the lender to change any terms & conditions if they are objectionable, failing which the borrower can even opt for another lender. 

 

Repo rate cut-How it cuts the home loan interest rate?

The repo rate is a rate decided by the Central bank, which in India is popularly known as India’s Reserve bank. The Reserve Bank of India lends money to the banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation. When the repo rate increases, the interest rates for fixed deposits increase while the lending rates also increase. On the other hand, if the reserve bank’s repo rate decreases, then the fixed deposit interest rates also lower, while the lending rates also decrease. The Repo rate is decided at the rate at which the commercial banks borrow money by selling their securities to the central bank of our country, i.e., the Reserve bank of India, to maintain the liquidity in case of shortage of funds due to some statutory measures. It is one of the primary tools being implemented by the RBI to keep inflation under control.

The repo rate is a monetary policy that can regulate the money supply, inflation levels & liquidity. The repo rate puts a direct rate impact on the cost of borrowing of the bank. The higher the repo rate higher will be the cost of borrowings for the banks and vice-versa. During the high inflation, the reserve bank keeps more control on the flow of money into the market. The higher interest rates being charged are a costly affair for businesses and industries, thus putting the slowdown on investments and money supply in the economy, thus keeping inflation in control. When the market is highly slack, the reserve bank’s repo rate is decreased, thus giving a boost to the economy & increasing the lending into the market. On the other side when the repo rate is cut, RBI infuses the funds into the system. Businesses and industries find it easy to borrow money in the economy. This ultimately boosts the growth rate of the economy. 

Following are the salient features of the repo rate set by the Reserve bank of India:

  • Helps in easing down the inflation:

When there is a shortage of funds in the market, and when the overall economy is slack, the reserve bank’s repo rate is being cut down to increase the liquidity into the market. The lowering of the repo rate gives rise in borrowing to the corporate companies and industries to expand their business and increase their presence in the market. As the corporate investment increases, there is a higher inflow into the market, thus giving a boost to the economy. When there is a positive sentiment in the economy, the general public’s purchasing capacity increases, thus providing a boost to the economy. The boost to the economy directly impacts the real estate industry; when there is a positive sentiment into the market, there is an increase in the properties’ sale. Simultaneously, there is a higher inflow of money into the market sale of all commodities increases into the market.

 

  • Helps in keeping the control of the flow of money into the economy:  

The RBI keeps strict control over the economy to maintain the flow of money into the market. When there is slack in the economy, the repo rate increases. If there is excessive inflation is found to be rising into the economy, the repo rate is being increased to restrict the excessive supply of money into the market. To keep the economy stable, the RBI keeps strict control over money flow into the market. As the sudden rise in demand for goods & commodities into the market can lead to hyper-inflation, the sudden decline of money flow into the market can lead to poverty & hunger. The real estate sector also shows similar signs as to when the market is slack, the real estate developers are left with huge unsold inventories. Simultaneously, if there is an excess inflow, the real estate prices increase with the sudden rise in demand. Thus the repo rate set by the RBI puts a very major impact on the sale of real estate into the market.

 

  • By reducing the repo rate- help provide a boost to the Real estate sector:

The repo rate cut reduces the lending rates for the loans. For a long time, there has been a continuous slide in the bank’s interest lending rates. The lending rates have drastically decreased from 10.50% to gradually sliding down to the 8.50% interest rates. Due to continuous ups & downs in the economy like the demonetization effect, the corona pandemic effect has led to the massive loss of the real estate market. At the same time, it is piled up with vast unsold inventories. The slide down in the interest rates has helped to easily access loans to the borrowers to buy their dream homes in an early stage of life. The higher intake of the loans provides a boost to the real estate sector and the leading financial institutions, which are the massive employment generators. As the investment in the real estate sector is very high, it gives a big turnout to the economy. When an individual purchases the property, there is a high amount of inflow into the economy due to the massive investment into an individual’s properties.

 

Conclusion

Thus the repo rate cut plays a significant role in the growth of the real estate sector. When the RBI cuts the repo rate, it gives easy access to the borrowers’ availability at lower interest rates. The repo rate cut increases the inflow of money into the economy as the lending increases by the individuals, companies & industries, thus leading to higher circulation of money into the economy.

 

Self Employed? Here are the steps to get loans approved easily?

The applicant who opts for the loans needs to follow a particular set of regulations & guidelines to get the loan quickly approved. The borrower has to submit all the necessary documents to the lender to get the loan approved. Any financial institution always prefers lending loans to people with a stable bank balance, good CIBIL score, all the government id proof, employment/business proof stating the source of income, no criminal track records, or proceedings against the applicant filing of income tax returns. Etc. The borrower who maintains all the necessary documents and pays the income tax and credit installments on time then the borrower is said to be amongst the honest persons who deserve the credit limit to be extended.

The documents are required to be submitted differently according to the different needs. The other general criteria which the basis of which the loans can be approved or may be rejected are the age of an individual, type of employment of an individual, overall buying patterns of an individual reflecting on the bank statements, general nature of an individual related to behavior like if convicted to any crime in any stage of life or whether if an individual is a politically exposed person. Even the qualification of the individual matters sometimes though not always necessary still the better-educated applicants are given better preference as they mostly tend to earn money legally. Simultaneously, the un-educated class is most vulnerable to malpractices, though always it is not necessary. Entrepreneurs are always in need of money as they require huge funds to expand the business, grow as an entrepreneur, and take care of the family’s responsibilities.

Following are the tips to get the loans approved by an entrepreneur:

[1] Maintain all the documents to meet the eligibility criteria:

The borrower should submit all the documents like pan card, aadhar card, passport, driving license. Etc. Along with the passport size photograph and a form to be duly signed and filled up by the applicant. The borrower also needs to submit the shop act license, business pan, GST number, income statement with the turnover record, and the profit & loss statement being generated with the help of a tax consultant/ charted accountant.

[2] Maintain income tax-related proofs:

As per the RBI mandate, the borrower should file the income tax, and the same documents related to ITR returns be submitted to the lender for the last three financial years. The borrower should also adequately maintain sufficient bank balance into the bank account to give the lender confidence while providing the loans. The government of India collects the income tax to provide best-in-class facilities to the general public as well as for the smooth functioning of the government. Thus an individual who pays the income tax on time is regarded as the alert citizens of India. Also, the borrower who pays tax indicates that the individual earns sufficient income to satisfy their own needs.

[3] Maintain the books of accounts stating the turnover of business:

The entrepreneur should maintain all the financial records of the business displaying the turnover of the company. Also, the borrower should provide the profit & loss statement of the financial year annexure authorized by the charted accountant. As the business proof of the individual, the turnover statement plays a crucial role in the approval of the loans. Bank or a financial institution always prefers to extend the loans to the individuals who, in the case of an entrepreneur, are having a profitable business and thus having stability into their career, and who can sustain in the long run into the markets. The borrowers should have ample funds to sustain; thus, only, in that case, the lender can provide loans to the borrower.

[4] Ethical business values of an individual:

Suppose the business person is employed in a legal business and has a very good reputation. In that case, the chances are that honest taxpayers and honest entrepreneurs are always highly preferred customers for the banks. As the bank’s non-performing assets are increasing very rapidly, the banks are becoming extra cautious about the provision of loans to an individual as in later stage it becomes a big head ague to the bank to sell the assets and recover the money from an individual.

[5] CIBIL ratings of an individual:

The CIBIL ratings of an individual play a critical role in the approval of the loans. As it indicates the mentality of an individual towards the repayment of the credits. The borrower’s CIBIL ratings, if found poor, then the individual can improve the score by timely repayment of existing loans as well as can also pay on time bills of credit cards & opt for lower credits from the banks, thus to improve the CIBIL score of an individual.

Conclusion:

Hence it can be concluded that if the entrepreneur maintains a proper set of documents, proper invoices of the bills, ITR returns statements, business registration. It is very easy for the business-man to get loans. Thus for ethical entrepreneurs, it is never a big hurdle to get a home loan approved to buy a dream home.

Pros & cons of taking a joint home loan with wife:

 

While applying for the home loans, the loans can be taken jointly or independently to buy the dream home. The borrower needs to submit the documents independently in the case of the single applicant, while in the case of the joint applicant, the documents of both the applicants need to be submitted. The common loan helps borrowers repay installments together as well as also distribute the loan amount together. While if the property is independently owned, the property is in the name of the single owner; thus, the borrower has to pay the installment of the property alone. As the prices of the property go on gradually increasing, it becomes more & more difficult for the aspirants to buy the owned property. Thus it is advisable to play some tricks & strategies while buying our owned property, and also to avoid paying the rentals for years to go, the borrower should opt for the owned property as it becomes a lifelong asset to the owner.

The joint-owned assets become a joint loan for the borrowers. In this case, if the borrower defaults on the loans, then both the owner as well as the co-owner in the common name may come into the defaulter’s list. If both the husband & wife duo are amongst the active earning members of the family, it is always better recommended to take the loan on joint name, as if a single person out of the couple is unable to opt for the loans then another person can take the additional responsibility of the repayment of the loans, thus creating a win-win situation for both the borrower as well as lender. As per the government policy, the borrower can opt for subsidy in registration of the property as well as opt for lower interest rates against the property due to women as co-owner.

Advantages of taking a joint home loan with wife:

[1] Helps share liability burden:

The joint-owned property is the responsibility of both the owner and the co-owner to share equal liability and responsibility for the installment. When the husband-wife both are earning family members, it is always advisable to jointly own the property. As a joint owner, the couple can enjoy equal benefits & ownership rights for the property. The couple can make their own choices regarding the selection of the property, budget which suits the property, the interior also of both the equal choice. Also, if one of the couples loses his/her job, then also the other co-owner can continue to pay the installments to gain full ownership of the property as well as avoid penalties to be chargeable by the lenders. Also in maintaining a good CIBIL score can help to avail future credit from leading financial institutions.

[2] Helps in jointly benefit of taxes:

The jointly owned property in which the one person as a co-owner who is a female can avail registration benefits and be charged with the lower interest rates to the borrowers. The borrowers under the PMAY[Pradhan Mantri Awas Yojana] can avail higher subsidy benefits for buying a property with one co-owner be female. The Government of India encourages the women aspirants to avail loans in their name and buy properties by a single/dual ownership. Under the PMAY scheme, interest subsidy can be available to Rs.2.67 lakh for buying the owned house. Also, in the case of the Income Tax, the borrower, both the owner & co-owner, can avail of the tax benefits depending upon the contribution of respective individuals in payment of installments.

[3] Helps in increasing the property ownership amongst women aspirants:

As India is a male-dominated country, all the decisions are taken by men. Also, usually, males tend to get a higher share of the property against the females. And the working-class population of the males far outnumber that of the females. Thus there is a vast disparity amongst the wealth owned by the males compared to females. As the workforce’s contribution is increasing that of the females, the aspirants who buy the properties in their name are also growing. As India and the state government are striving hard to increase the ownership of females, the results are encouraging, with women making their contribution in the day-to-day activities and buying the dream homes as well on their names. This gives women a sense of ownership, sense of pride & freedom of choice in case of the right & resettlement.

Cons of taking a joint home loan with wife:

[1] Disputes arising out of the property:

If the couple gets divorced or separated from each other, then disputes may arise in the property, thus leading to problems in ownership & resettlement of the property. If the installments are yet to be paid to the bank, then in case of separation, both the couples may deny paying the installments leading to default & disputes arising out of the owners of the property; also, if both the co-owners may go in the default case.

[2] CIBIL score of both the applicant may get affected:

The borrower’s if they default jointly, then the CIBIL score of both the applicant may get affected, leading to the cancellation of all future credits to the individuals. The loan default can lead to heavy penalties on both the borrowers, thus leading to liability on both the couples.

[3] Loss of ownership by both the applicants in case of dispute:

If the joint owners get separated from each other and thus stop repaying the installments of the house, then irrespective of their contribution into the flat, the borrowers may end up losing the property, and it may become a sealed asset of the bank, leading to both loss of individuals.

Conclusion:

Hence it is either flip side of the coin wherein the borrower can be recommended to buy the property with the joint owner as a wife to reduce the burden of the liability, avail benefits under the schemes for women, and save money. Simultaneously, the life-long healthy relationship and trust are an essential part of joint ownership to enjoy the right and avoid any default continuously.

 

How to reduce your home loan EMI burden?

The loan repayment is a significant liability on the borrower to keep the get transferred property in their name after the complete installation. If the borrower defaults on loans, then he/she is liable to pay hefty penalties on monthly installments to re-pay the borrowed amount to the bank. Also, the bank’s cibil ratings get reduced in case of the default of payment, while on another side, it may get improved if the borrower re-pays the loan on time. There are multiple ways to reduce bank’s installment by using some simple tricks & strategies. The income tax department also provides tax benefits to the loan borrowers under the income tax act 80C to avail exemption up to a specific limit as prescribed by the income tax department rules & regulations.

The usage of home loans benefits in many ways. As it helps the borrowers buy the dream homes in the early stage of life to opt for loans for a longer duration of time for repayment. It gives a boost to the real estate industry in a better way as real estate companies are a great source of opportunity creators for many employees. The borrowers need to furnish all the necessary documents like income proof, employment proof, bank statement showing sufficient bank balance, investment proof. Etc As per the RBI guidelines, an individual must submit all the necessary documents and the filing of ITR returns to fulfill the loan eligibility criteria.

Following are the ways to reduce the loan EMI:

  • Consider pre-paying of the loan:

The borrower, for convenience, can opt for loans of a higher moratorium. Thus, in contrast, if the borrower gets some excess money through financial investments. Sale of any other property, or through any other means through which extra income is generated, the borrower can re-pay higher monthly installment, thus making savings on interest chargeable. More, the earlier the monthly installments are paid, the individual can do more savings. There are very few cases wherein the borrower may be charged a penalty for the early repayment of dues. 

 

  • Take advantage of the EMI waiver option:

The banks may provide discounts or benefits on installments to the borrowers to encourage them, borrowers, to pay EMI on time. In very few cases, borrowers can give a discount or some waiver on interest payments; however, they should take care to avail the discounts. Such schemes are available only on the higher installments being charged.

 

  • Try making a higher down payment and opt for lesser loans:

The borrower should try to make a higher down-payment and pay lower EMI by opting for fewer loans to save money on interest payments. The borrower should try maximizing as many savings as possible. Thus the borrowers can help make the maximum down payment while purchasing the property and opt for lower credit.

 

  • Consider transferring loan to another lender:    

The borrower, while re-paying the existing loan, can transfer the loan to another lender. Thus, after moving the loan to another lender, the borrower can start paying EMI to a new lender by availing loans at a lower interest rate from the new lender, thus saving interest. Therefore the transfer of loans is beneficial as well as recommended to the borrower.

 

  • Don’t hesitate to negotiate the terms & conditions

The borrower can negotiate the terms & conditions of the lender’s loans to save money on interest on a 0.50 basis or something lesser than that. The lender can grant an even higher moratorium for loan repayment extension. Hence get a higher duration for repayment as well as lesser monthly installments is liable to be paid.

 

  • Pay higher Emi

 After re-paying the installments for a longer duration, the borrower can then re-pay the pending dues faster as the borrower’s monthly income increases gradually after a long period of years, leading to higher income means higher repayment capacity. Thus faster repayment can make the borrower debt-free and help the borrower save money on interest repayment.

 

Conclusion:    

It is always wise to opt for EMI and save on interest repayment for the loans. The borrower can either make early savings to purchase the property & opt for the lower credits to buy the own property. The borrowers can negotiate the terms, make higher repayments, .etc. Also, good CIBIL ratings can help borrowers opt for loans at a lower interest rate.

 

Loan against the property: Here is when you should consider it:

Loan against the property is a process of opting for the loans by an individual by mortgaging the property and submitting the documents to the lender, and availing liquid cash in return for that. The borrower should also have the property with clear titles and with no partner or co-owner be involved in the property. The borrower should also have an average score of CIBIL ratings, such that the loan cannot be approved. The loan against the property can be taken or should be considered only when the individual needs required liquid cash to satisfy his/her needs like buying a new property, renovation of the property, expansion of the business, travel purpose, marriage purpose etc.

The funds borrowed under loan against the property are not liable for the income tax deductions. Only in case of the amount invested for the purchase of the property can the borrower can avail tax benefit on the interest being paid to the lender. The borrower can avail immediate liquid cash from the lender, without any hesitation as the property is already being mortgaged by the borrower to the lender ,and hence there is a surety to the lender that they can recover the funds through the seal of assets of the mortgaged property and thus will not be left with under-recoveries. The borrower can avail of a loan up to 60-70% of the total property amount as liquid cash.

Reasons worth being considered for availing loan against the property:

· Avail liquid cash in hand:

The borrower can avail some liquid cash in hand by the mortgage of the property documents to the lender ,thus getting to utilize the funds taken from the lender, for the purchase of new property, marriage purpose, renovation, travel purpose. The liquid cash availed can better be utilized in case of shortage of funds or in emergency need of cash required for any of the purposes.

· Avail loans even against poor Cibil rating:

The borrower can avail of the loan in case of the mortgage of the property even while having a comparatively low cibil score as the borrower has already mortgaged the property with the lender, thus allowing the borrower to avail funds even in case of the low cibil score. The bank or a financial institution may not hesitate to extend loans even in case of low cibil score ,which otherwise, without the guarantor or mortgage of property, may not extend loans to the borrower.

· Avail of higher loans credit even in case of the low salary:

The applicant can expect higher credit even in case of the lower salary as the lender is having the property documents being mortgaged thus, if the borrower fails to repay the instalments, the lender can seal the assets of the borrower. Thus the higher amount of credibility the borrower can avail, helping the borrower enjoy the leverage of a higher amount of money for the personal expenses. The borrower needs to repay the installments on time, while as in the

case of the delay of the payment, the borrower can still be heavily penalized in spite of the borrower has mortgaged documents with the lender. The parameter scales for applying for the loan against the property are different from the loan applied against the regular income proof. As in this case of loan against property, the lender may easily consider extending loans up to 60-70% of the property value with a comparatively even higher moratorium provided.

· No ITR returns mandatory:

If the borrower does not has proof of filing income tax returns, then also the borrower can avail loans from the bank due to the mortgage of property with clear titles. In the case of the bank loan in regarding to the income proof, the borrower cannot avail of the loans without the income tax returns filing as the reserve bank of India guidelines. A Loan against the property is a secured loan without any much criteria loan is extended to the borrower, which only mandates the borrower to opt for a loan with proper submission of documents with clear titles. The interest rates typically charged are being the 10-15% range while opting for the loan against the property.

· The borrower can opt for a higher moratorium against higher interest rates:

The borrower can opt for longer duration loans being stretched against the mortgaged property as the borrower has already submitted property documents to the lender ,in case of the loans opted, giving surety about recovery. Thus the borrower can opt for the lower monthly installments with slightly higher interest rates. In case of delay of installment or missing installment the lender may charge a heavy penalty against the monthly installments being assigned to the borrower.

Conclusion:

Hence it is always advisable that the borrower should opt for the loan against the property in case of the availability of the extra property to mortgage and thus avail some liquid cash in hand to buy new property or else opt for personal loans like travel loan, marriage loan, educational loan.etc While if there is a shortage of funds by an individual, then the borrower can opt for a loan against property as it enables quick access of funds to the borrower helping spend money for real estate or personal expense purposes.

Five factors to be considered while applying for the loan against the property

The loan against the property is a process in which the borrower should opt for when an individual is in need of the money thus can borrow money by lending the property to the financial needs of an individual. The borrower is expected to read all loan-related documents carefully before the approval of the loans and signing of the documents. The borrower can also negotiate the terms related to the loan- related conditions if the borrower finds the terms & conditions misleading or totally in favor of the lender ,only then the acceptance of terms & conditions can be denied by the borrower. The borrower should also compare rates for loans being available so as to get maximum benefits and save money on interest re-payment.

The borrower ,for additional information, can also go through the Reserve bank of India guidelines and compare if the key essential factors are mentioned in the term agreement or not. The borrower can also file for the income tax returns so as to get benefit on the interest credit, if the borrower will utilize the funds for buying a new property. The borrower should keep ready all the necessary documents so as to keep the get the easy approval process of the loan to be sanctioned by the bank. Also, the borrower should ensure easy availability of funds so as to ensure smooth repayment of funds and avoid the penalty being charged. The borrower should also ensure a consistent income guarantee so as to avoid delay of repayment of funds and avoid penalty/ sealing of the property. The borrower should also ensure the exact market rate of the property being required to be mortgaged so as to know the exact value up to what extent the borrower can avail of the credit facility.

Factors to be considered before the approval of the loans:

· Clauses related to the loan’s terms & conditions:

The terms and conditions of the loans should not be in such a way that the borrower may get mislead or should not be overcharged for the interest repayment at higher charges. In terms & conditions, it should be clearly mentioned related to the penalty levied upon the borrower for the delay an installment of the monthly loan installment. Also the borrower should verify if there are any hidden clauses wherein the extra charges be levied on the borrower, thus leading the customer to get de-frauded. Also, the borrower can request to modify some clauses into the agreement ,which are found to be totally misleading or totally against the favor of the borrower, failing which the borrower should deny the loans of the applicant. While in such a case, the borrower can even opt for the competitor companies loans, wherein the terms can be better and in the favor of the customer. The borrower should also decide the loan amount to which is required to be needed so as to satisfy the need and purpose of the individual.

· Identify the worth of the property:

The borrower should estimate the exact current market valuation of the property so as to decide accordingly the exact estimate of the loan eligibility amount which can be borrowed. The borrower can apply for the loan on 60-70% of the valuation of the property value. The borrower can even opt for the lower amount for a loan against the property as per the requirement of an

individual. The property evaluator can be the best kind of consultant who can estimate the property valuation.

· Check with the past track records of the borrower:

Before applying for the loan, the borrower should check for the past experiences of the other loan applicants who opted for the loans previously and then must have shared their experiences about the overall likelihood or dislike experience about the bank. The borrowers can also check on the internet about the performance and stability of the lending financial institution. Also, it should be verified if any malpractices or harassment been carried out by the financing company in that case the borrower should avoid taking loans from such financial institution and opt for another competitor.

· Check for the comparative interest rates of the borrower:

The borrower can check for the competitive rates of the loans being offered to the customers by the lender so as to avail the best possible interest rates available into the market. The borrowers can save quite a big sum by opting for the lowest competitive rates offered by the lender. As the interest is being charged on a cumulative basis ,the borrower even, on a point basis of lower interest rates, can save quite a good money to the borrower.

· Check for the liability of the interest burden as well as re-payment capacity of the individual:

The borrower should decide the repayment possibility by taking into consideration the monthly installment being charged to the borrower. As against the mortgage of the property, the borrower should be able to repay the loan on a monthly installment so as avoid being penalized.

Conclusion:

It can be assumed that the borrower should take all these points into consideration so as to avoid getting cheated by misleading terms & conditions as well as be able to avail loans at the lowest possible interest rates in order to save money for an individual. Also, the repayment capacity of the borrower should be analyzed by the applicant itself according to the monthly salary so as to avoid getting penalized for non-repayment of the loans.

Long term benefits of home loans

For many homebuyers opting for the home loan is a preferred choice as the many interested buyers aren’t able to pay the total amount to the real estate developers; thus, they need to opt-in for the loans to buy the dream homes. The borrowers need to maintain a good credit score to avail of the loan facility. The borrowers also need to submit all the necessary documents to fulfill the applicant’s loan eligibility criteria. The borrower should apply for the loan to avail long term credit repayment moratorium for buying the dream home. For most flat buyers, it is highly recommended to opt for loans to purchase homes in the early stages of life. If the applicant is below the age of 30 years, then, in that case, he/she can avail of the loan for a maximum moratorium of the next 30 years.

According to his/her age criteria, the applicant should avail of the loan for a maximum tenure so as lessen the burden of monthly EMI. At a lesser amount of the monthly installments, the borrower can comfortably pay the shorter amount of monthly installments and utilize the remaining monthly income for the other necessities or another household purpose. Also, on payment of EMI, the borrower can avail of the tax benefit for a longer duration to save money and reduce the tax payment burden for individuals. 

Following are the benefits of the loans being opted for the long term:

  • Tax benefits on home loans:

The borrower can benefit from tax filing to save money or lessen the burden on expenditure during the moratorium of loans. The borrower can avail of tax exemption of up to Rs.2 lakhs beyond the exemption limit of Rs.2.50 lakh. 

 

  • Long term moratorium available for the home loans:

The borrowers can repay the loans for a long duration of years, depending on the borrower’s age. The borrower can avail a maximum term of up to 30 years for the repayment of the loans if the applicant takes a loan up to the age of below 30 years. For the higher age of beyond 30 years, the borrower can avail of the loan for the duration of up to retirement age. The higher the loan moratorium lesser is the monthly installment the borrower has to pay in case of loan repayment.

 

  • Opportunity to grow your funds:

Even if the borrower can buy the property on his funds, the borrower can still benefit from tax repayment. The existing funds can be put in stocks or mutual funds by the borrower; thus, the borrower can get the returns on the investments and utilize those funds in repayment of loans. The borrower can also invest in systematic investment plans SIP to get quick returns on investments, and the increased value can be utilized to repay the installments on time. There are multiple ways to invest, like fixed deposits, mutual funds, stocks, or systematic investment plans, to get higher returns on investments.

  • Liquidity benefits:

Suppose the borrower feels a liquidity crunch and is forced to take a financing facility like a personal loan or a collateralized loan. In that case, it may cost you much more interest than your home loan interest amount. The funds can help protect the financial difficulties and help other financial goals.

 

  • Due diligence of property by the bank:

Banks exercise strict due diligence before financing a project, something that reduces the risk to a great level. They verify the scheme-related documents, their title, and clearance before approving a loan. So if the home loan is taken from the bank, it becomes safer than an un-approved project. There is no answer to the home loan dilemma. Using the owned funds to buy a home can be a good step when you are assured that it would not affect your finances.

 

  • Longer tenure loans assure higher eligibility:

An individual’s ability to repay the home loan depends on the individual’s ability to repay the loans on time. This, in turn, is assessing based on the disposable income. Thus for a shorter tenure, all the things are being equal, your EMI will be higher. Therefore the borrower would be eligible for a smaller home loan than the actual eligibility. For a longer tenure or higher eligibility, long-term loans are more beneficial. Also, the banks or financing companies always need a long-term recurring business to keep the active loans open.

 

  • More extended repayment have more extended flexibility in case of the long term loans:

As there are no charges applicable to pre-payment of home loans under a floating rate of interest, you can pay the entire outstanding or part of the home loan if the borrower wants to sell the house or free any debts. Moreover, if the loan is under the fixed rate of interest, you can prepay the entire outstanding every year without any pre-payment penalty. Thus the borrower can pay the debt-free earlier while retaining the flexibility of payments according to the cash flows.

 

Conclusion:

Thus, we conclude that if the borrower opts for the longer duration home loan, the applicant can avail more extended duration tax benefits and lower payment of monthly installments, thus helping reduce the burden on repayment of dues. Also, the banks encourage the borrowers to take loans for a higher duration of time as they expect more and more recurring business from the individuals.