Top 5 questions to ask from your home loan service provider

A house is the most valuable asset in everyone’s life. If you’re planning to take a loan for the same, then it is good to know about your loan’s term and conditions before you sign the dotted lines:

Here are some tips for the same:

Rate of interest: Rate of interest will depends upon loan amount, your profile, your property type, it’s market value and prevailing market interest rates. Hence you must check applicable rate of interest from multiple banks before you finalize the same. Check Home Loan Interest Rates in India.

Lender type: Is your lender a bank / NBFC. Banks rates are based on base rate. However NBFCs rate are based on PLR (Prime Lending rates).

Rate Spread: In case of floating rate loans, the applicable interest rate is sum of base rate (decided by bank) and spread. Hence whenever base rates are changed, applicable rates are automatically changed (in fixed spread cases). Hence one must know the spread being offered by bank and spread type (is it fixed or variable)

Processing Fee: Depending upon the loan amount and customer profile, some lenders are ready to negotiate the processing fee. Hence, we highly recommend negotiating hard on this before finalizing the deal.

Pre-payment / Part payment penalties: In case of floating loans, generally there is no penalty for pre-payment and part payment. However it is better to get it clarified from the lender. Also in case your loan is fixed for some time, it is highly recommended to know about the penalties before-hand.

 

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How Banks Calculate Your Home Loan Eligibility?

Today we will talk about how to calculate how much loan amount you are eligible for. We will talk about how different banks calculate loan eligibility and what are the different parameters which can directly affect your loan eligibility.

The principles used are similar for all types of loans like home loan, car loan, personal loan and loan against property but the calculation differs based on type of loan.

What is Loan Eligibility?

Loan eligibility implies how much money you get from a bank for purchase of your home or against a property you already own or for any other purpose. Your loan eligibility is calculated based on the formula which we discuss with you in this article.

How Banks Calculate Your Home Loan Eligibility

How does the bank look at you at the time of sanctioning a loan?

To understand more about loan eligibility, let us think from a lender’s point of view for a minute. Think as if you are a lender and you are giving money to a person.

Major Factors Which Affect Your Loan Eligibility:

  1. Your monthly income:

First question you will ask a borrower – how much money can he pay as EMI every month.  This depends upon his income and his expenses. You will also want to know how regular or sustainable the income flow is.

It is a simple fact that higher your monthly income more is the chance of your being easily able to pay a larger EMI. Since you also need to meet your regular living expenses, it is fair to say that you can pay only a portion of your income, and not your entire income, as EMI.

  1. Past credit history:

Your past loan repayment record and credit history also determine your loan eligibility. If a person has a bad credit card repayment record, then he/she is categorized as a high risk customer. Either he faces genuine hardship in being able to pay EMI or has been a willful defaulter. In either case, banks are quite wary of lending to such people.

  1. Age of the loan applicant:

Age of the loan applicant also affects loan eligibility. Banks have to ascertain that for how many years you can pay the EMI. A person in his 30’s can pay the loan for next 30 years, but a person who is in his 50’s will retire at 60 years and hence he has less than ten years to pay back his loan.

  1. Profession:

Profession of the loan applicant also determines his/her loan eligibility. Banks want to ascertain if the income flow is regular or not. Some professions such as software developer, doctors, banking jobs are eligible for a higher loan amount as compared to those people who are working in BPO sector.

  1. Your past relation with bank:

Many banks (especially PSU banks) look at your past relationship with the bank and decide your loan eligibility.

  1. Employer category:

All the major banks have categorize big companies into A, B, C categories and provide them different interest rates. So, employees of Cat A companies may be offered better interest rates as compared to others. You need to check about this information with the respective banks which matters a lot in the long-term.

Latest Trends in the Banking Industry

Latest Trends in the Banking Industry:

Banking sector is growing at a very fast rate and the way people do banking is changing even faster. Gone are the days when one had to visit the bank during day time on working days and wait for hours in front of teller counter to get cash or do other simple transactions.

India has a huge Rs. 80 trillion economy which is supported by the banking industry. Penetration of banking services is low but increasing. Current penetration is 3.8 ATM’s and nearly 8 bank branches for every 10,000 people. Today, in this article we share some of the new trends that are changing the face of the Indian banking sector.

  1. Social Banking:

Use of different social media platforms for bank transfers which also include international transfer is the next big thing that is likely to happened in the future Indian banking industry. Popular social media websites such as Twitter, Google+, and Facebook can be used to provide immediate money transfer between friends and colleagues.

Today, Facebook and Twitter can be used as a money transfer medium both locally as well as for international platforms. Some of the banks that currently offer this facility are ICICI Bank and Kotak Mahindra bank.

Home loan interest rates

 2. E-transfers:

Many alternative systems are now available for electronic money transfer without paperwork. These include NEFT for low value transactions and RTGS for high value transactions which are based on the IFSC code of each bank branch linked to the central server. Transfer typically takes less than few hours. More than 80,000 bank branches are now on this system.

In large metros, the Cheques are now cleared using image recognition technology wherein instead of the actual Cheque, only an electronic image of the Cheque is presented to the drawer’s bank for clearance. This makes it possible for banks to process Cheques and credit payee’s account on same day.

  1. Virtual Bank Branches:

Virtual branches are ones in which you visit on the bank’s official website and transact over a secure electronic platform. After this you can select your bank branch and finally you are taken to a completely virtual platform in which names and pictures of the employees are easily displayed. You can click on a specific image with whom you would like to interact and start online chatting via video interface, very similar which you can do in a branch. ASB Bank of New Zealand has already started this type of service which works similar to a real bank.

Useful Links: Use Free MyLoanCare Home Loan Calculator