10 Golden Rules While Taking A Home Loan

28 May, 2017 | 0 comments

Home Loan
Taking a house is a lifetime decision for many of us. As the prices in real-estate sectors soaring every day, it’s almost impossible for a common life goer to buy a house without any loan from financial institutions. Thus a home loan becomes a part and parcel of life impacts the economic decisions and
targets of our life. So, while taking a home loan we should be extra cautious about our financial prospects so that we don’t get stamped under the loan’s monstrous claws. Let’s find the things to do and not to do to live comfortably with home loans.
1. Research thoroughly:
There are hundreds of banks and finance companies to offer home loans to you. In fact, many of them lure you with attractive offers but don’t fall prey to their traps. Normally home loans are taken for a longer tenure, so a thorough
research is required as regards terms and conditions of the loans. An important thing is to compare the processing fees as it differs drastically from bank to bank. In a nutshell, shop for the best loan you need.
2. Spend conservatively:
Frugality pays you the best dividend especially when you are living with a loan. Always try to save a bit more than you usually do, because the money you
save can be utilised for foreclosure of the home loan. This loan tenure is crucial and may bleed you with interest barbs if mishandled.
3. Take advantages of parking:
There are a couple of banks that provide parking facilities, means you can park your additional funds in a particular bank account till you need it. The advantage of this type of account is
that the interest on home loan gets proportionally reduced for the period you parked your additional funds in that account.
4. Learn about fixed and floating rate:
Before you go for a home loan you need to study of your own about the fixed and floating rates of interest. The basic is that in the case of fixed rate, the rate of interest is fixed for a few months as per
the agreement, while, in the case of floating rate the interest rate fluctuates with the market rate. Normally it is found that floating rates are cheaper than fixed rates in the long run.
5. CIBIL score:
This is a tool to judge your credit worthiness. It gets better with timely and regular repayment of loans and credit card bills. A person with a score of 750 plus has a better chance to get
loans at an attractive rate of interest. A study shows 80% of the home loan approvals are given to the people who has a credit score of 750 plus.
6. Understand foreclosure norms:
Understand the foreclosure norms of the banks or financial institutions. It is to be kept in mind that RBI has instructed the banks and financial institutions disbursing home loans not to charge foreclosure charge or pre-
payment penalty for early closure of loans in case of floating rate of interest. Though it exists in the case of fixed rate of interest, one should understand the bank specific rules in this regards.
7. Borrow within your limit:
The thumb rule is that your home loan EMIs should not be more than 50% of your net monthly income. Your home loan EMIs should not be a headache for you. Don’t put your financial goals and
savings at stake by taking loans beyond your permissible limit. Borrowing more than your repaying capacity not only disrupt your financial plans but will make your life miserable.
8. Keep the tenure as short as possible:
Normally home loans are taken for a longer period of time maximum up to 30 years. But try to keep the loan period as short as possible, because longer the period of loan dearer your home loan would be, you have to forgo more
money as payment of interest. It is a tendency of the banks and financial institutions to push their customers into a longer loan period by luring with attractive offers, but the borrower should not fall prey of their plans.
9. Take an insurance policy:
If someone has a large amount of loan, it’s best to take an insurance cover as well, because God forbids if the borrower dies before repaying the loan, the entire family would have been on streets to repay the loan. Whenever we
take a loan, we may put our family prospects in the uncertain state of affairs if the loan is not covered up by sufficient insured amount. Hence, it’s better to take term insurance plans for the same tenure as of the loan covering the loan amount.
10. Discuss with the family:
Before taking up loans, always discuss things within your family especially your spouse. Readying the family members for a loan means moulding the financial attitude of the members. They tend to
think more economically and spend money more judiciously. These habits within the family help you to save more, which you can ultimately utilised for foreclosure of the loan.

Taking loans is not a big deal but requires stringent financial discipline, so that it doesn’t become overburden on the borrower. Own study and research about a loan prospect can save you a lot
rather than sheer dependence on the bank or financial institution personals. The tips given above are time tested and following the same will surely bring a big difference in life.
Taking a house is a lifetime decision for many of us. As the prices in real-estate sectors soaring every day, it’s almost impossible for a common life goer to buy a house without any loan from financial institutions. Thus a home loan becomes a part and parcel of life impacts the economic decisions and targets of our life. So, while taking a home loan we should be extra cautious about our financial prospects so that we don’t get stamped under the loan’s monstrous claws. Let’s find the things to do and not to do to live comfortably with home loans.
1. Research thoroughly:
There are hundreds of banks and finance companies to offer home loans to you. In fact, many of them lure you with attractive offers but don’t fall prey to their traps. Normally home loans are taken for a longer tenure, so a thorough research is required as regards terms and conditions of the loans. An important thing is to compare the processing fees as it differs drastically from bank to bank. In a nutshell, shop for the best loan you need.
2. Spend conservatively:
Frugality pays you the best dividend especially when you are living with a loan. Always try to save a bit more than you usually do, because the money you save can be utilised for foreclosure of the home loan. This loan tenure is crucial and may bleed you with interest barbs if mishandled.
3. Take advantages of parking:
There are a couple of banks that provide parking facilities, means you can park your additional funds in a particular bank account till you need it. The advantage of this type of account is that the interest on home loan gets proportionally reduced for the period you parked your additional funds in that account.
4. Learn about fixed and floating rate:
Before you go for a home loan you need to study of your own about the fixed and floating rates of interest. The basic is that in the case of fixed rate, the rate of interest is fixed for a few months as per the agreement, while, in the case of floating rate the interest rate fluctuates with the market rate. Normally it is found that floating rates are cheaper than fixed rates in the long run.
5. CIBIL score:
This is a tool to judge your credit worthiness. It gets better with timely and regular repayment of loans and credit card bills. A person with a score of 750 plus has a better chance to get loans at an attractive rate of interest. A study shows 80% of the home loan approvals are given to the people who has a credit score of 750 plus.
6. Understand foreclosure norms:
Understand the foreclosure norms of the banks or financial institutions. It is to be kept in mind that RBI has instructed the banks and financial institutions disbursing home loans not to charge foreclosure charge or pre-payment penalty for early closure of loans in case of floating rate of interest. Though it exists in the case of fixed rate of interest, one should understand the bank specific rules in this regards.
7. Borrow within your limit:
The thumb rule is that your home loan EMIs should not be more than 50% of your net monthly income. Your home loan EMIs should not be a headache for you. Don’t put your financial goals and savings at stake by taking loans beyond your permissible limit. Borrowing more than your repaying capacity not only disrupt your financial plans but will make your life miserable.
8. Keep the tenure as short as possible:
Normally home loans are taken for a longer period of time maximum up to 30 years. But try to keep the loan period as short as possible, because longer the period of loan dearer your home loan would be, you have to forgo more money as payment of interest. It is a tendency of the banks and financial institutions to push their customers into a longer loan period by luring with attractive offers, but the borrower should not fall prey of their plans.
9. Take an insurance policy:

If someone has a large amount of loan, it’s best to take an insurance cover as well, because God forbids if the borrower dies before repaying the loan, the entire family would have been on streets to repay the loan. Whenever we take a loan, we may put our family prospects in the uncertain state of affairs if the loan is not covered up by sufficient insured amount. Hence, it’s better to take term insurance plans for the same tenure as of the loan covering the loan amount.

10. Discuss with the family:
Before taking up loans, always discuss things within your family especially your spouse. Readying the family members for a loan means moulding the financial attitude of the members. They tend to think more economically and spend money more judiciously. These habits within the family help you to save more, which you can ultimately utilised for foreclosure of the loan.

Taking loans is not a big deal but requires stringent financial discipline, so that it doesn’t become overburden on the borrower. Own study and research about a loan prospect can save you a lot rather than sheer dependence on the bank or financial institution personals. The tips given above are time tested and following the same will surely bring a big difference in life.