Loan Archives -

Should You Take a Holiday Loan for Going A Vacation?

Thu, 11 May 2023 15:22:36 +0000

The Buyt Desk

Planning to go on a holiday but your pocket doesn’t allow. A holiday loan may come to your rescue but you must know how it works? First thing first it is a type of unsecured personal loan. This type of personal loan is meant for seasonal expenses. Just like other personal loans, you can quickly get a holiday loan without providing collateral. You can get this loan from online lenders, credit unions, and banks with fixed monthly payments and fixed interest rates. Based on the lender, you can borrow anything between Rs 15,000 to whatever amount you wish to.

How does a holiday loan work?

Like most personal loans, holiday loans don’t need collateral if you meet the qualifications of your lender. The loan amount, interest rate, and monthly payment are affected by your income and credit rating. Some lenders enable borrowers to pre-qualify for a loan without affecting their credit score by giving some financial details.

For what purposes you can use a holiday loan

Holiday loans can cover the bigger cost of travel. For example, paying for a place to stay, meals, and airplane tickets. You can save a lot on holiday travel using your holiday loan.
You can use your holiday loan to buy a gift for everyone on your list when you don’t have the required money set aside. It can ease the stress that present-giving can make on your finances.
Another use you can make of a holiday loan is to get financial assistance with entertaining expenses like groceries, catering, and decoration.
Some lenders allow borrowers to use the money from a holiday loan for other expenses. They don’t put any limitations on the way you use the loan amount.

Holiday Loan is an ‘Easy to get Loan’

If you have a goo track record of paying back your loans on time then you may consider a holiday loan as its very easy to get –

It doesn’t require much documentation.
You can get your holiday loan approved and disbursed within some days based on the T&Cs (terms and conditions) of the NBFC and bank. You can even get the money within some minutes if you have got a pre-approved personal loan offer from a recognized financial institution.
Since a holiday loan comes with no-end usage restrictions, you can use the amount to pay for all travel-related expenses.
You don’t need to provide any collateral, guarantor, or security to borrow the amount as it comes under the category of an unsecured loan.
You can apply for the loan procedure online right from your home.
Timely paying the amount each month helps in creating a good credit score.
Since the loan has a fixed interest rate, you can plan your monthly repayment with a clear format of precise dues.
You can get convenient repayment plans throughout your loan tenure to enjoy your dream vacation.

Should you get a holiday loan?

Since there are no limitations on the end-use of the loan money, you can use it for travel-related and non-travel-related expenses. But, remember this is an unsecured loans that come with high-interest rates. Taking a holiday loan might be a good option to plan and enjoy your dream holiday without worrying about delaying your vacation or suppressing your holiday wishes due to a lack of savings. However, it is always recommended not to go on a vacation with the borrowed amount if you can’t afford to repay the money.

Based on the NBFC policy or the bank, the holiday loan has an interest rate between 12-28% per annum. Let us assume that you’re borrowing a holiday loan of Rs 5 lakhs at a 15% per annum interest rate, you would have to pay Rs 17,333 for 3 years for about 5-6 days of holiday. Alongside the expenses covered in your holiday loan, you would come across some unwanted spending.

To cover those expenses, most vacationers use their credit cards. When the credit card bill becomes high, some people change it into credit card EMIs. The stress of a high-interest loan cost and the huge credit card EMIs create a huge financial burden. To reduce the financial pressure, sometimes a person has to use their savings. In the future, when you need to borrow money for any emergency, it can be difficult to get a new loan because your holiday loan will rise the debt-to-income ratio.

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Do The Maths Of EMI & Down Payment Before Buying Your Dream Car

Thu, 23 Feb 2023 04:40:07 +0000

The Buyt Desk

Ravi had a dream of owning a car from his childhood. After getting his first job, he fulfilled his dream and purchased a car worth Rs. 10 Lakhs on a five-year loan tenure. Ravi didn’t have enough money and did not make any down payment. Instead, he took a car loan and made zero down payments. Do you think Ravi made the right decision?

Many of you will say yes as at least Ravi fulfilled his dream of owning a car. But at what cost? There is nothing wrong in achieving your dream but when it is linked to your wallet then financial management matter as well.

Ravi purchased a Rs 10 Lakh car with no down payment as he didn’t have the down payment amount. Otherwise, it would have been 10-12% of the car value, i.e., around Rs 1 lakh of the down payment.

Assuming he got the loan at a 9% interest value for five years. His EMI would be Rs 21,049. According to this calculation, he would pay Rs 12,62,938 for the car after five years. The total interest he would pay is approximately Rs. 2 Lakhs, 48 thousand.

What would have happened had he waited a few years to accumulate the sum and get the car all in cash?

Suppose Ravi invested Rs 21,049 in a monthly SIP offering a 9% return for three years (9 % is an average return a SIP offers).

A SIP of 21,000 for three years with 9% interest would fetch him Rs. 8,77,613
A SIP of 21,000 for four years with 11% interest would fetch him Rs. 12, 80,725.

In addition to that, a car is a depreciating asset. Its value gets cut down to 25% right after coming out of the showroom. So, after five years, by the time the car loan tenure end, its value will come down to half.

On the other hand, if Ravi chose to invest the EMI cost in SIP, it would fetch him more money than his car value and keep him free from liability.

Furthermore, these days maintaining a car is getting costlier with the rise in fuel price and maintenance costs. Also, taking the car out in traffic is no less than a pain.

Conclusion – If owning a car is your dream and you believe it would increase your productivity, then buying it on loan is worth it. But, if there is no urgency, there is no point in buying a car on loan. Instead, invest the amount you can spend on EMI and purchase it in cash after a few years. Even a 50-60% down payment can cut down the significant interest amount.

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Why Prepaying Your Home Loan is a Good Idea?

Wed, 25 Jan 2023 16:51:16 +0000

The Buyt Desk

Home loan prepayment means you either make a partial or full payment of your loan amount before the planned repayment period. It helps in reducing the EMI burdens or reducing interest rates. When you get a home loan, you will find that the loan principal gets paid off at a slower pace during the starting years. Hence, it is good to make prepayments earlier in tenure than later on.

For example, you get a home loan of INR 50 lakh at an 8% interest rate for 25 years with INR 38,591 monthly EMI. For 25 years of the whole tenure, you will end up paying a total amount of approximately INR 65.8 lakh including interest.

In the first 5 years of regular EMI payments, which is 20% of 25 years of loan tenure, just 7.7% of the loan is paid off. In the next 5 years, just 19.2% of the total loan is repaid. So, there would be an increase of 11.5% in the loan paid off from the initial five years to the next five years. By the end of the third set of five years, about 36.4% is paid off. This is an increase of 17.2% from the second set. By the end of 4th set of five years, about 61.9% of the loan is paid off, which is a rise of 38.1%. In the last set of tenures, 100% of the amount is paid off.

RBI Rate Hike

Reserve Bank of India (RBI) has announced a 35 (bps) basis-point increase in the repo rate to 6.25%. The central bank has increased rates by a cumulative 225 bps because it began the rate-tightening cycle in May 2022. These hikes are affecting individual borrowers who are planning or have purchased a car and consumer durable, and floating-rate home loans. This year, all customer loans have turned costlier. Consumers are under the burden of mounting interest rates and increasing EMIs (equated monthly installments).

Impact of Rate Hike on Home Loan Purchasers

Home loans associated with repo rates have the immediate transmission of rising policy rates. Many banks have completely passed on the repo rate rise of 190 bps to home loan customers. This hike has increased a loan tenure of about 13 years for consumers who have initially chosen 20 years loan period believing that they had borrowed a home loan at 6% at the home purchase time. Borrowers who preferred an EMI rise rather than a loan tenure rise have observed their EMI increase by about 20%.

The complete home loan eligibility of the new consumers is reduced by 40% with a recent repo rate hike. However, people who are planning to get home loans should never time their home-purchasing decision depending on policy rate movement trends.

Existing home loan purchasers who notice crucial improvements in their credit profile after getting a home loan can start a home loan balance transfer to lower their interest costs. The improved credit profile provides them the eligibility to move the existing home loans to other lenders at comparatively lower interest rates.

Use Prepayment Strategy

To reduce the loan tenure, customers can use the prepayment strategy. Long-term loans like home loans facilitate consumers to make part pre-payments. Think about your home loan repayment strategy and make pre-payments to save on increasing interest costs. Adding an extra thousand monthly can lessen your interest payout over the long term. It would help you in shortening the ballooning loan tenure.

The right time to re-pay your home loans is while getting the annual bonus. Allocate a certain portion of your bonus to prepay the housing loan each year.

The constant rate hikes may result in short-term turbulence in the complete housing demand when purchasers are optimistic about taking a home-buying decision. This may even be included in the overall acquisition cost of the buyer. The lower interest rates have been considered the major parameter in the resurgence of real estate demand over the past few years. Therefore, the rate hike would often become an obstacle to affordability.

It is believed that there is a crucial pent-up demand from a huge population base and first-time home purchasers.

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When To Apply For A Home Loan Balance Transfer?

Thu, 24 Nov 2022 18:31:44 +0000

The Buyt Desk

It is not advisable to do a Home Loan Balance Transfer at any time. Apply only if it is the right time for the transfer. Let us see when the good time for applying is.

A home loan is a huge commitment as it is long-term anywhere between 8 to 30 years. You need not continue your home loan with the same lender until complete repayment. There is an option to change lender if you find it beneficial for you. Reasons can be anything from a lower rate of interest to better terms and conditions.

What is a Home Loan Balance Transfer?

Home Loan Balance Transfer is moving your outstanding Home Loan from your lender to a different lender for your benefit. How this works is – when you shift your home loan to a new lender, the latter pays off the outstanding balance to your current lender, so that your existing home loan account is closed. And, your new home loan account starts with a new lender who offers you better deals. With a new lender, you may be paying a lower rate of interest and having better loan terms and tenure.

A home loan balance transfer is the act of shifting your ongoing home loan to a new lender for a lower rate of interest, better service, or better terms. You may be thinking that switching the home loan lender as soon as you are offered a lower rate of interest is a good option. But that may not be the case. You need to consider many other factors too. Almost all banks and housing finance companies nowadays offer Home Loan Balance Transfer facilities with many benefits. Lenders are more attracted to offering pre-approved Home Loan Balance Transfers to borrowers with very good credit scores. Banks offer all these offers and promotions to attract the borrower towards them. But you have to check whether it is a win-win situation for both you and the bank. You need to learn the art of shifting your ongoing home loan to a new lender to ease your repayment burden.

Few scenarios when you should apply for a home loan balance transfer –

Interest rates lowered – The CRR and bank rate is regulated by the Reserve Bank of India from time to time. And these two will directly affect the interest rate. The interest rates are flexible and hence can vary from time to time. When should you apply – you can consider transferring the home loan if the potential new lender is offering the home loan at a lesser interest rate which will in turn reduce your monthly EMI burden significantly.
Cost and terms – Every time there is a reduction in interest rate, transferring your home loan is not an option. There are terms and conditions to be considered like the transfer cost and the terms of transfer. Study the costs involved and the terms thoroughly and carefully. Switch your home loan if you are okay with the costs involved and the terms and unhappy with your existing lender. When should you apply – you can consider transferring the home loan if offered the lowest transfer costs and pleasant terms. Even consider the time taken to do the transfer.
Outstanding loan amount – When the outstanding loan amount is big it is advisable to transfer the home loan. A home loan EMI like any other EMIs comprises the principal amount and the interest amount. The principal amount will reduce as it gets paid gradually as the loan matures. This reduces the outstanding loan amount. When should you apply – you can consider transferring the home loan when the outstanding loan amount is higher. Consider the transfer if a good chunk of the home loan is still pending and another lender offers you a better deal.
Property authorization – Check in advance with your potential new lender if they have approved your property for a home loan. Each bank or financial institute has different approval lists and procedures. When should you apply – you can consider transferring the home loan when your property is authorized by the new lender. The property will be approved if it is undisputed and built by a credible builder.

Summing up

Consider the terms and conditions of the new lender, rate of interest offered, property authorization, and outstanding loan amount to decide the right time for transferring your home loan. Now that the home loan transfer is an online procedure. Since it is online, everything will be in place and hassle-free.

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Different Types of Home Loans

Fri, 30 Sep 2022 04:34:39 +0000

The Buyt Desk

When you want to buy a new house of your dreams you may have to go for a home loan. Home loans are not debts when planned well. Let us understand more about it.

Indians have a notion that debts are a bad thing. But certainly, they are not as they help you grow and buy things you need and dream of. Home loans help you afford the home of your dreams. A mortgage is not a bad thing as it helps you grow. Along similar lines, an education loan helps a student learn and get into a high-paying job and be financially independent. Both student and home loans can be considered an investment as they help you be in a better position and charge a very low rate of interest.

All dream of buying a home from the day they start earning. It is the biggest dream in one’s lifetime as it needs a lot of money, effort, and time. It will be one of the biggest assets one will own. An individual needs to arrange money for a down payment and the rest can be from the home loan. A home loan is the easiest way to create money for buying a home at a very low rate of interest.

What are the various types of home loans in India?

For different purposes, there are different types of home loans in India. One may need a loan to buy a flat, individual home, or land, extend an existing house, or do renovation and repair work at home. Always know the reason for the home loan so that you can decide on the home loan you need. Below are various types of home loans available in India with their features and other important information about the loans.

Home Purchase Loan – This is the most popular loan among home loans in India. As the name suggests, this can be used to buy the dream house. This loan is offered by housing finance companies, private banks, and public banks. This is an easy loan one can borrow when purchasing a house. Repayment of the loan can be done in instalments in the form of EMI. The loan amount granted is usually 80-90% of the house value. And the rate of interest for such mortgage loans can be fixed, floating, or hybrid.
Home Construction Loan – This is one more kind of home loan that many Indians avail of as they like customized homes. This is specially designed for people who own land but need financial help to build their dream house. To avail of this loan, the borrower needs to meet certain conditions like the land where house construction will happen should be purchased within a year and should be ready with analysis and construction cost estimation.
NRI Home Loans – This loan is designed for non-resident Indians who want to buy a home in India. This is very similar to a regular home loan but needs exhaustive paperwork as borrowers don’t stay in India.
Home Improvement Loan – This loan is designed for individuals who want to renovate or repair their existing house. This loan finances for upgrading the electrical system, plumbing, waterproofing the ceiling, painting expenses for both interior and exterior of the house, etc.
Home Extension Loan – This loan is designed for individuals who want to extend their existing house into a bigger one either by adding rooms on the same floor or adding a completely new floor to the existing building. If a borrower has already availed of a home loan, then a home extension loan can be requested or added to the existing loan from the same lender.
Composite Home Loan – This loan is designed for individuals who want to buy land and also do construction on this land. This is a double financing loan that provides finance for both buying land for building a home and for the construction of a house on the same land.
Home Loan Balance Transfer – This loan is designed for individuals who want to change their home loan lender. There are times when the borrower is not satisfied with the current loan lender and wishes to change the lender. Reasons could be anything like a high rate of interest or not satisfying services by the current lender. Under such needs, lenders can go for the home loan balance transfer loan which facilitates the borrower to transfer the loan balance (outstanding) amount from one lender to another.
Home Conversion Loans – This loan is designed for individuals who want to shift from their current home to a new one. These aid people with adequate financing to buy a new house so that they can shift to a new house from their existing home.

Summing up

Home loans are a blessing for those who want to buy a new home but do not have enough funds. You should do good market research about the lenders and the facilities they offer before buying a home loan. Also, go for an appropriate home loan so that it is financially beneficial to you. Know your financial conditions well and plan based on numbers and not projections you make.

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Why Is Home Loan Called A Good Loan?

Thu, 29 Sep 2022 04:21:41 +0000

The Buyt Desk

When one wishes to buy the house of their dreams, they may have to avail of a home loan. Loans are not a good thing but not so in the case of a loan taken for buying a house. Home loans are not bad debts but are considered to be good debt as it makes you an owner of an immovable asset. but

All Indians dream of buying a home since the day they start earning. It is one’s biggest dream and biggest asset in one’s lifetime. Buying a home needs a lot of money, effort, and time. The house buyer needs to arrange down payment money as the rest can be paid from the home loan. In India, the easiest way to create money for purchasing a home is a home loan which can be availed at a very low rate of interest.

Currently, real estate prices are very high and this makes it difficult for Indians to buy their dream home. Home loans are designed to help people buy homes as the loan amount is 80-90% of the house value. Non-banking financial institutions and public and private banks offer home loans by mortgaging the property till the loan is repaid.

What are the various types of home loans in India?

There are different types of home loans for different purposes in India like loans to buy a flat, individual home, or land, for extending the existing house, or for renovation and repair work at home. Below are the various types of home loans –

Home Purchase Loan
Home Construction Loan
Home Extension Loan
Home Improvement Loan
Home Loan Balance Transfer
Composite Home Loan
Home Conversion Loans
NRI Home Loans

What is the eligibility to avail of the Home Loan?

Each lender has its list of eligibility criteria. The main criterion which is considered by all is the borrower’s credit history. A credit score of over 750 is a must to avail loan at the best mortgage rates. There are a few other factors that are considered to determine the eligibility of the borrower which are –

Age of the borrower
Employment type
Minimum salary per year
Residency status
Margin requirements
Collateral security
Stable occupation
Assets, stability, and liabilities

What are the Benefits of a Home Loan?

Many Indians avail of home loans to buy, renovate, construct, or repair their homes. Below are a few of the advantages of a home loan that makes a home loan a good debt –

Tax Benefits – Income tax deduction is the major benefit of a home loan. On both interest and principal repayment, tax deductions can be claimed. Thus one can save some funds. Here are a few ways under Indian Income Tax law to save money –

claim up to Rs.1.5 lakh on principal repayments under section 80C
claim up to Rs. 2 lakh on the repayment of interest under section 24B
claim up to Rs. 1.5 lakh on special duty expenses under section 24B

Lower Interest Rate – Compared to all other loans, home loans have a lower rate of interest. During a cash crunch, loan top-up of existing loans can be made use of. So that you will get more funds at lower interest rates.
Long Repayment Tenure – Mortgage loans have long repayment tenures, unlike other loans. Loan tenure can easily be around 30 years. By opting for long tenures, EMI reduces and the budgeting burden reduces.
Tax benefits on the second house – If the borrower has brought a loan for the second house, the entire interest on the loan amount can be claimed for deduction under Section 24B of the Income Tax Act.
No prepayment charges – When the borrower opts to repay the home loan in a lump sum before the loan tenure, the lender usually charges prepayment penalties on this payment made. But borrowers are not charged prepayment penalties on floating rate home loans. Whenever a borrower has excess funds, they can utilize this fund and make a payment towards the home loan. By doing so, one can lower the burden of loans by either reducing EMI or loan tenure.
Balance Transfer Facility – You can change lenders when you are not satisfied with your current lender. You can transfer your home loan to a lender who offers better service and lower interest rates.
Dream home becoming reality – Buying a house from savings is not possible for all. But availing home loan one can easily buy their dream home and repay the loan easily in EMI.
Capital appreciation – Over time enjoy the gains from the rise in property prices
Saves on rent – Currently, rents are very high, especially in metro cities. Paying rent is a dent in your monthly budget. Instead, one can pay EMI and own the property.

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Are You Eligible For A Loan Or Not?

Wed, 09 Mar 2022 12:40:32 +0000

The Buyt Desk

Eligibility for loans is calculated on an array of factors and many financial institutes have their own ratios and eligibility values. Here are 3 important ratios.

Getting loan eligibility is the first and crucial step. Banks and other financial institutes scrutinize each and every aspect of the borrower based on RBI and internal guidelines to ensure the eligibility of the loan application. When you apply for a loan (any from personal to home loans), you should go through all the checks that the financial institution does to make sure you will not be in bad debt. The checks are mainly financial and book values, many ratios and numbers are calculated. Only when all the numbers state that you are capable of repaying the loan, the loan is sanctioned. If the numbers say that there are chances that you may not repay the complete loan amount then there will be another round of scrutiny to analyze the risk that banks will take if they sanction your loan. Based on all investigations the loan amount that you are eligible to borrow is incurred.

What parameters are examined for loan approval?

Be it any kind of loan that you apply for, there are a few basic parameters that the bank checks for approving your loan. The banks mainly consider these parameters to analyze the applicant’s preliminary eligibility before moving to the number game.

Applicant’s CIBIL score
Applicant’s age on the day of loan application
Educational qualification of the applicant
Applicant’s outstanding loans
Applicant’s work experience to make sure if there is a regular source of income
Applicant’s income including fixed and variable
Applicant’s tax payment record
Applicant’s financial assets and liabilities
Applicant’s current workplace reputation
Repayment tenure of applied loan

What are the three important deciding ratios?

After assessing the preliminary parameters, many financial computations happen. Banks get many numbers after calculations. Based on these, the banks decide on eligibility and the loan amount is decided. The three most important ratios that are calculated based on the net income of the applicant to decide his/her loan eligibility for all types of loans are Fixed obligation to income ratio (FOIR), Loan to value ratio (LTV) and Installment income ratio (IIR).

What is Fixed Obligation to Income Ratio?

FOIR is a ratio that is used to evaluate the eligibility of the applicant. Here Fixed Obligation refers to the EMI to be paid by the applicant every month and not the professional tax, Recurring Deposit, PF, LIC premium, charity to trust etc. Fixed Obligation is just the fixed monthly obligations of an applicant without including the statutory deductions. FOIR calculation is

FOIR = (Sum total of all existing obligations / Net monthly salary) * 100

This number denotes the percentage of the monthly income of the applicant which is his or her current living expenditure. And the remaining percentage of the income will be used by the applicant to repay his or her loans (personal loan, home loan, car loan). This number determines the loan amount that the applicant is eligible for. Lower is FOIR, higher is the chance of loan approval.

What is the Loan to Value ratio?

The Loan to Value Ratio is a percentage of the property value that the bank can finance through a loan. LTV is a lending ratio that evaluates the lending risk for the Banks. This is mainly used when a property is mortgaged for loan purchase. Here Value refers to the asset value the applicant is ready to mortgage. LTV calculations is

Loan to Value Ratio = Mortgage amount / Property value

Banks and financial institutes prefer sanctioning home loans to the applicants opting for lower LTV ratios. Lower LTV ratio, lesser is credit risk for banks.

What is the Installment to Income Ratio?

Instalment to Income Ratio is used by banks to assess the loan eligibility of the applicant. This ratio is also very similar to Fixed Obligation to Income Ratio. The applicant is eligible for a loan amount whose monthly instalment does not exceed the IIR percentage of applicants per month salary. IIR calculations are

Installment to Income ratio = (EMI / Net Monthly Salary) * 100

As per the bank’s standard rule, the loan amount is decided such that the applicant’s EMI will be 35-40% of his/her salary. EMI is adjusted such that IIR is around 35-40. And based on this value and loan tenure, the loan amount is figured.

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5 Things You Can’t Miss If You Are Planning To Buy A Home

Mon, 04 Oct 2021 04:15:37 +0000

The Buyt Desk

Buying a house is a big decision. You come to a conclusion only after dealing with a lot of deliberations. You go through a lot of houses. Meet a dozen brokers and figure out various locations. When you find the right house it may not fit in your budget. The house that fits in your budget may not be of your liking. Buying a house is just not a financial decision but an emotional decision too. Finally, when you are ready to make the purchase there are a host of things that you can’t ignore especially if you are planning to take a home loan.

Assess Your Repayment Capacity

The tenure of a home loan is long. It could be somewhere between 20 to 25 years. You must assess your repayment capacity. You should have a constant flow of money to ensure that you could service the loan without any breaks. Times are uncertain and if you belong to the service class then you must have a backup plan. Just in case you face a situation where you are not earning any salary you should have a fallback plan till you get back on your feet. This is where an emergency fund plays an important role. You must have an emergency fund before you start your home loan. This fund should have enough money to cover the cost of equated monthly instalment (EMI) of your home loan if in case your constant money stream faces some hiccups.

Check You Credit Worthiness

You should have a good credit score if you are planning to apply for a home loan. The 3 digit credit score is a report of your financial behaviour towards the loan. Are you a timely payer or do you delay your credit payments? How many loans have you taken? If your credit score is above 750 it’s considered to be good and you will find it easy to get a loan. A good credit score can also bring down the interest rate of your loan.

Deciding On Duration of the loan

Often borrowers feel taking a shorter tenure will be better. The sooner you pay sooner you get over with it. But do keep in mind even if you choose a longer duration you always have the option to prepay your loan before the tenure with no penalty charges. But if you take a shorter tenure and fail to pay any EMIs you will be charged with a penalty.

A Proper Homework Before You Say Yes

Prior to finalising a home you must check out and compare the home loans of various banks. Even a difference of just half a percentage can make a lot of difference in your EMI burden. Not just the interest rates but consider other costs such as the processing fees, hidden charges , flexibility of repayment and penalty if any on repayment of the loan.

Insurance cover

An insurance cover for your loan is very crucial for the financial safety of your family. In case of any untoward incident, insurance will ensure that the loan is taken care of without causing any financial distress to your family. A loan is your liability and not having a safety cover of insurance can prove to be a big burden on your family.

Keep these 5 things in mind and make an informed decision while buying your dream home.

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Things To Keep In Mind When You Apply For A Loan

Mon, 16 Aug 2021 06:26:43 +0000

The BuyT Desk

Taking a loan is one of the most significant decisions and requires long research to conclude. It has a direct impact on the financial condition of the borrower. And according to financial experts, the effects of unplanned loans stay for years with the entire family. Therefore, it should be planned astutely.

So, if you are thinking of getting a loan, here are six key points you need to consider.

Interest Rate

You must compare every source of acquiring loans and opt for the one that offers fewer interest payments. Financial institutions such as Credenc, Bankbazaar, Paisabazaar, etc., are there to help you with the loan comparison that different lenders provide. You must carefully choose between Floating and Fixed loans. Floating loans tend to change. They are usually 1-2 % lower than fixed, based on the market condition.

Credit Score

You need to check whether you are creditworthy to take the loan. Maintaining a good credit score portrays that you have a good history of loan repayment. Also known as CIBIL score, it ranges from 300-900. If your score is above 750, then it is an ideal situation to get a loan.

Access The Cost

A loan comes with additional cost that includes prepayment fee, processing fee, and late fee. So, you must get an estimate of the charges that the lender might levy on the loan. You also need to plan your budget to repay the loan. You can also opt for an online loan calculator to estimate the monthly EMI payments.

Evaluate the requirement

Do not make decisions in a hurry. You need to inspect and determine why you actually need the loan. Usually, people take loans to meet financial requirements such as buying a vehicle, wedding purpose, or address medical emergencies. Go through the list of your priorities and decide the amount that you are willing to borrow.

Check Loan Repayment Process

Even before taking the loan, you must have the repayment planned and the source ready. Always take a loan that you can repay through your income. Are you under financial obligation? Is there any repayment of debt left? Then, you must think twice before proceeding.

Make A List Of Your Queries

Before you borrow a loan, always try to resolve every bit of confusion prevailing in your mind. Ask yourself:

What should be your first step to take a loan?
What is your credit score?
How much interest rate would be sustainable?
What are the terms and conditions associated with the loan?
What are the processes of repaying the loan?
What more do you need to do?

Always try to take loans from certified and accredited loan providers. Check whether every process is transparent and never fall for any gimmicky loan offers. Try to reduce the number of credit cards and never exceed 30% credit utilization. And, always try to make payments on time and to avoid any mistakes. You can choose the automated process for payments.

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