Home loans: Some precautions you need to take

Home loans: Some precautions you need to take

Small home loans in the range of  15 to 30 lakhs have become extremely common and affordable. Houses have become far more affordable than they were a decade ago. More and more banks are vying with each other to lure customers into their fold. With this it has become very difficult to work out who is offering the best deal. There are the fine prints, freebies, and hidden charges. Once a borrower locks himself into an agreement with the lender, it is a legally binding commitment to make monthly repayments whatever is your economic situation. It is for this reason that borrowers must exert extreme caution before making such a huge commitment.

The loan amount sanctioned to a borrower depends upon numerous factors. This includes your age, profession , income, city you live in, job stability and previous credit history. Once the bank disburses the loan amount to the seller or builder, your repayment clock starts ticking right away. What happens if the borrower defaults on repayments to the lender? After a series of calls from the bank, a more stringent action can be taken against the borrower. Never underestimate EMI (equated monthly installment) non-payment intimations, letters, notices and calls.
The bank will then intimate the co-borrower in the loan, if any, and try to see if he can recover the payments. When all this exercise turns futile, the lender can take over the possession of the house just by lodging a police complaint. Remember that the property is collateral to the loan until the borrower makes the repayment in full. It is essential that small home loan borrowers with lesser buffer money for emergencies take more precautions when it comes to taking a home loan.
Here are a few points to bear in mind while taking a home loan:
Stay financially comfortable
Never borrow more than what you can afford to repay. Over stretching your capacity could mean trouble over the longer run. It is not entirely possible to predict all life's future emergencies and unexpected expenses. So before even scouting for a lender, work out financial feasibility. It is easy to fall into a debt trap and terribly difficult to come out of it.
Shop around extensively
A little bit of lethargy could make a difference of thousands of rupees. Get a detailed description of the loan plans, interest rates, fees and penalties from the lenders. Make a thorough comparison. Sometimes agents can try to compel you into schemes that might be expensive. Do not be caught unawares by hidden fees or last minute surprise fees that may spring up.
Check clauses
In the world of intense competition, reality gets camouflaged behind fine prints and catchy slogans. Never get carried away by slogans and assurances that are not in writing. If you are promised a fixed loan, ask for clauses and terms. There is a possibility that lenders will later contend that the rate is fixed for a 'certain period' after which it will be revised.
Never default on repayments
If you fail to comply with the terms of a loan by not meeting interest or principal payments by their due dates, then you could find yourself in default. Know how much you owe people and manage your finances wisely. Increasing the loan tenure could reduce your monthly repayment burden. Banks usually oblige as they also do not want their customers to default.
 Terms and Conditions: The whole terms and condition need to check before apply for the home loan.
Check that If there is any hidden charge on the loan.
Check the lowest interest rate : Check the lowest interest rate available in the market normally the interest rate are more or less fix, but its differ from bank to bank .As the 1% change is also a big matter
 EMI Amount: Emi generally charged 40% of the net disposal income as per the rule. As the future is uncertain it’s better to reduce the EMI 15% of the disposable income ,and save the certain amount as reserve.
Future Plan: People generally increase their EMI amount for the future as they think there total income increases in future .It’s true that after 5 years the total income of anyone more than the present income ,but on the same time there expenditure also increases with the time ,so its better t to keep the EMI in the same formate than to increases in future.
So, guys be careful and make a equilibrium on income and expenditure