25 Things to know before taking a home loan

#1. Calculate Monthly Interest payable.

The calculated monthly interest should be affordable for you to pay each month. Also think about the future. Plan for all contingencies so that at sometime even you cannot pay a month u should be get from other sources and pay and also repay the other sources.

#2. Give High priority to monthly reducing basis loan

Select a bank loan where the interest is calculated on a monthly reducing basis than on annual reducing basis. This will be useful to you in long run.

#3. Fixed or floating rate.

You have to decide whether to go on a fixed rate or floating rate. Fixed rate will be useful at long run but the amount for which loan will be less than in floating rate. In Floating rate the interest rate is fluctuating and interest rate may be increased often. So before buying a loan you should first decide on this.

#4. How often is the Fixed or Floating rate changed in past years

You should enquire how often in the past 10 years have the fixed or floating rate changed by the bank. This will help you to decide whether to go for which rate and in which bank.

#5. Sign after understanding the full loan details

Don’t sign the loan till you have understood about the loan fully. Some people will say that details we can get it later and postpone it to make you sign. Sign only after you get all details and know what you are doing.

#6. Don’t sign loans because of low interest.

Don’t sign the loan blindly because interest is very low alone. There may be other factors, which also has to be given priority equal to this. So analyze all other factors before taking the loan.

#7. Check each clause of the document carefully

Many people sign the loan documents without reading some clauses fully. They face problem when a clause mentioned in the document will be an issue, because they have not fully read the document.

#8. Check payment penalty amount if loans are paid before.

Suppose if you are to pay the amount before the loan term expires, then the bank may levy you some penalty amount for paying it before. So ask this also before taking the loan.

#9. Enquire about the bank loan details to already availed customers.

Before taking up a loan ask your friends or people in family who have already applied the loan before. They may give you more tips and cautious information.

#10. Loan Interest is not Always Tax Deductible

Please note that loan interest is not always tax deductible. You should know the limit of tax, which will not be deducted from loan before proceeding.

#11. Better Customer Care Support.

You should also select the bank, which gives you better customer support. Some banks may be taking more time to reply the customers or ignorant. So in future if you got a problem or need to ask some details, they should be handled or answered by the bank.

#12. Beware of misleading offers

Sometimes there will be offers given by many banks on loan rates, which may be misleading. Unless you know the full detail and hidden costs of the loan do not accept it. Sign only after you understand the full details of the loan.

#13. Plan for extreme contingencies.

Plan for the extreme contingencies like the time when you were unable to repay the loan and what are the things you need to know for that. So you will be aware of the consequences and how to handle it.

#14. Have some Adequate cash reserves before applying loan.

It is best to have some cash reserves before applying the loan because after you apply the loan and start deducting the loan from your salary, you may need some cash reserves for contingencies

#15. Loans with Insurance.

It is better to take loan with insurance. People are adopting this in recent days. It will need a little extra amount alone where you can be safe.

#16.Analyse other charges that come with home loans.

There are other costs like processing fee, service fee that will be laid by the banks for the loans. So analyze all the charges applicable and plan accordingly.

#17. Payment of interest for which principal from which time.

First understand in detail when the first amount will be released by the bank to the builders and from when other amount will be released and how much you have to pay at each time.

#18. Other Benefits available.

Some banks will give good offers like free insurance or other benefits. This will give you more benefits than the other banks where you apply.

#19. Check whether you have mandatory documents.

Check whether you have all the documents the bank needs to take out the loan. Some documents will take some time to get. But the bank will give you a loan only if you have all the documents.

#20. In the long term you may be paying more.

Even if the bank offers is good you may end up paying more money in the long run. So you should be careful knowing the terms and conditions

#21. Single or joint loan to be decided.

If you are taking a loan and if both are working in a family, it is better to apply the loan in joint so that loan can be paid easily in less installments

#22. Consider your Income and future revenues.

Before applying the loan consider about your current income and what you will get in future and you will be able to meet both the loan and your personal expenses.

#23. Think twice before getting a loan.

Think twice before getting a loan because once applied you have to pay for the loan every month from your income so your income will also be reduced. So plan twice.

#24. Repayment time span.

Be careful while selecting the repayment span. It is best to. pay the loan in 10 years than 20 years. Keep in mind that you will be paying 2 or 3 times of your principal totally when the loan ends.

#25. Don’t get the loan for the sake of tax exemption.

Don’t get wrapped up in loan for the sake of loan exemption because you will be paying certain amount of money each month from your pockets.

Also see 25 things you must know before buying or renting an apartment.

In India Icici bank, HSBC Bank, UTI Bank, State Bank of India(SBI) are famous banks where you can apply for home loan.

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