No. of views : (68262)
Which bank to select to avail a housing loan?
Posted on: 25/Feb/2019 10:57:52 PM
It is really a rather high ambition and a challenging task in life to buy and own a house! Especially for the middle-income group, it is a huge challenge and heavy investment and rather a very heavy burden.
Only a very very few from this middle-income group are likely to possess the entire amount in 1 lot to buy a house! Thus, taking a housing loan from the banks has become an integral part of the house purchase.
In this process, the selection of the source for taking the housing loan is a very important issue. Here is an attempt to indicate some of the aspects to be considered for selecting the right source for taking a house loan.
It is absolutely true that many of the banks are roaring over the rooftops regarding the housing loans offered by them! The main reason is the safety/security as either the house or jewellery will be pledged, there is no great bother on the issue of non-payment of the loan EMI! The main point to consider here is the extent of interest to be paid for the housing loan. For instance, even if the interest offered by a bank is 0.5% higher as compared to another bank, this total amount of interest of that extra 5% is likely to be substantially high!
Some o the rather ignorant housing-loan seekers tend believes that all the nationalized banks charge the same interest rates for housing loans! This is not so!
So, when going for a housing loan, enquire the conditions in more than 2 to 3 banks!
While visiting a new bank approaching for housing loans, they will enquire the details of the present savings bank and why the loan is not being taken from there! It is not wrong to tell the true reason which might be a higher interest rate. The main reason for their enquiry is another thing – that the present bank may not have accepted the housing loan application if any earlier loan has been taken and not paid back properly!
Further, even if the truth is hidden, it will come out sooner than later! The main reason is CIBIL which is ‘a rating’ – whenever someone takes a loan from any of the banks and the same has not been paid back properly, the concerned bank reports it to CIBIL.
About CIBIL - Credit Information Bureau of India Limited - CIBIL Limited is a credit information company operating in India. It maintains credit files on 600 million individuals and 32 million businesses. Trans Union is one of four credit bureaus operating in India and is part of TransUnion, an American multinational group,
The score given by CIBIL reflects the nature and honesty of the return of the loan taken a score given accordingly. This score may vary from 300 to 900. The possibility of housing loan sanction gets brighter if this score is nearer 900. However, most of the banks do not hesitate to extend housing loans even if this CIBIL score is near 300! For the present, let us focus on how to select the bank:
If the CIBIL score is on the higher side, one can request extra concession on the interest rate and get them too!
There are 2 types of interest rates. One is a constant or permanent steady interest – here, one needs to pay the same interest rate for the balance of the loan until it gets repaid. This is usually 8%.
The 2nd categoryry is of varying interest rates. The interest rate may fluctuate (high and low) depending on the market conditions.
It is rather difficult to answer in 1 word which of the above 2 categories are beneficial! Further, most of the banks nowadays have removed the permanent constant interest rate category.
Generally, as for the nationalized banks, the duration period for the EMIs would be more beneficial. The private banks may attract with the interest rate as well as early processing of the housing loans. One has to be ultra-careful in his aspect!
Some banks charge a processing fee for getting and releasing the housing loan – generally known as Documentation and Processing Loan. This may be a rather substantial amount! While the possibilities that indulging in buying a house is very likely to wipe out most of the savings are looming large, even these proceeding fees may appear astronomically high!
Also, ascertain and get the details of the penalty to be levied in case the EMI is not paid before the due date.
First of all, calculate the percentage of the housing loan from the bank as a percentage of the total house cost. This is known as LTV – Loan to Value.
Think of some more associated aspects regarding the housing loan –
Even while considering the selection of the bank, if any amount of money comes to hand, would it be helpful to close the house loan account earlier
In case if it is done, whether the bank will impose any penalty for this (known as ‘preclusive fee’)
Are there any indirect payments? Are the insurance coverage schemes ok as per our desire
Thus, think of all the factors/aspects enumerated above and select the right bank for the housing loan! Good luck!!
