Introduction
Buying a home involves enormous expenditure, and you often cannot handle it with your savings alone. The only way to fulfill this dream is then by applying for an affordable home loan. The affordability of the loan depends on how much you must repay as Equated Monthly Installments (EMI). The EMI amount is the part of the principal amount and the interest on the loan amount. If the housing loan interest rates are high, the EMI will be proportionately higher, making it challenging to repay monthly installments. It is, therefore, necessary to check all factors that influence the home loan interest rates to ensure you get the cheapest home loan in India.
This post outlines the most effective ways to get the cheapest home loans in India.
Choose the Appropriate Loan Tenure
Depending on the lender, borrowers can obtain long-term loans (thirty years) or short-term loans (five years). The advantage is that borrowers can secure a colossal amount, buy their dream house in a posh locality, and repay affordable monthly installments spread out over thirty years. The interest rates are lower than short-term loans.
The drawback here is that they will have a more extended mortgage period, which means they will be paying interest over a more extended period making the loan expensive.
Choose the appropriate tenure with a lender with zero or low prepayment charges. Start repaying as per the agreement in the initial and later stages when they can afford to make higher repayments, try to make prepayments, and foreclose the loan. Opt for home loans like the PNB housing loan for zero prepayment charges.
Choose a Lender to Match your Need
When you decide to apply for a loan, please don’t rely on others to tell you which one is good for you. The one that suits your friends or colleagues need not match your needs. The first lender you check out may not be the best for you either. Check and compare each lender before settling for one.
Here is what you need to check and compare with other lenders before applying for the loan:
- Interest rates
- Loan terms
- Down payment requirements
- Mortgage insurance
- Closing costs and fees of all kinds
Ensure a more accurate comparison by researching the various home loans available and finding lenders offering your such loans. Use the lender’s list to find one who offers you the best rates, fees, and terms. To avoid regret later, read the fine print.
Improve the Deal through Negotiation
After selecting a lender, negotiate the loan rates, terms, and fees. Lenders are open to negotiations and offer prospective borrowers cheaper deals after checking the following details about the borrower:
Credit Score
The first thing that the lender considers while offering a home loan is the borrower’s credit score. A high credit score (800 and above) not only guarantees loan approval but also lowers interest rates. For instance, salaried employees with a high credit score can avail of a housing loan at PNB housing interest rates of 6.75* percent. Your repayment history helps in maintaining a healthy credit score.
- Payment History
A borrower’s payment history shows the borrowers’ consistency in paying loans or credit over time. It is the primary factor while calculating the credit score and constitutes about one-third of it. A good repayment history indicates that the borrower is less likely to default in his future payments. Lenders have no issues offering loans at lower interest rates when borrowers have an excellent repayment record.
- Relationship with the Customer
When the lenders are impressed with the past dealings with their customers, they are happy to offer them loans at convenient terms in the future.
- Pre Approval Home Loan Offer
Pre-approved home loans are similar to regular housing loans; the only difference is that the lender approaches the borrower with a loan offer. Banks or NBFCs offer such loans to their existing customers who have taken loans in the past and have good repayment track records. After thoroughly checking the borrowers’ current creditworthiness, they will make such offers. It is advantageous to the borrowers also because they are available at competitive interest rates. And their processing and disbursal time is faster.
Conclusion
Although the benefits of home loans are many, the borrowers must be cautious while applying for them. The borrower must repay the loan with interest, which is why one should avail of them only in emergencies. Also, the borrowers should read the fine lines and ask for clarifications if any of the terms are difficult to understand before signing on the dotted line.
What did we learn?
