A Home Loan is, in every sense of the word, a medium that’s used to achieve one of the biggest financial goals in life – buying a home of your own. It isn’t really something that you do every day, so not being updated about it isn’t that uncommon. However, a home loan is one of the biggest responsibilities that you could ever have, which is why it is of prime importance that you take it seriously.
We may go for a well-advertised and marketed Home Loan thinking it is the best deal (with the mentality that since it is popular, it must be good), but there’s much more to it than that. There are many mistakes that people tend to make when availing home loans, the most common of which are listed below: –
Not doing enough research
What people mostly do is visit the bank where they have a savings or a salary account and get a loan approved. This is definitely the easiest choice. Easiest, but not the best choice! A home loan is a big commitment that will last for about 20 years or so; this makes it necessary that you shop around a bit before you finalize a loan. Even a minor difference in the interest rate can make a huge difference in the amount you have to pay back.
Not considering the LTV ratio
You will hardly ever get the entire purchase value of the house as a loan. You will need to put in a certain amount as down payment. Most people forget to consider this loan-to-value ratio that is an important part of looking for a home loan.
Forgetting hidden costs
Buying a property is not just about the down payment and the loan EMI. You also need to think about extra costs like maintenance cost and property tax; something that a lot of people tend to overlook. You need to consider these extra charges before you decide how much EMI you can afford every month.
Not taking insurance
If you are the sole earning member in your family, or even if you’re not, taking an insurance cover for your loan is something you must do. This will ensure that if something happened to you, the loan would not have to be repaid by your family members.
Not sticking to the budget
When searching for a house, it is very normal to fall in love with a bigger or more expensive house. A lot of people get swayed by the sales talk and tend to make loan commitments that are more than they can afford. If a particular amount is available for you as a loan, it does not mean that you have to avail it all. Consider what you can afford and stick to your budget.
Bonus Mistake: Not checking your credit score
Home loan applications can get rejected if a person has a poor credit score. A rejected application is good for no one, so before you apply for a loan, it is better to find out your credit score yourself. If you have a poor score, you can work on improving it before you apply for a home loan.
You need to be very careful while selecting a home loan; it is a commitment that can in no way be taken lightly. Being knowledgeable and proactive will keep you in good stead in this regard.
We are India's No.1 - Most Trusted Financial Services Brand, according to the Brand Trusted Report, 2017 & 2016 consecutively. We are also the largest Gold Financing Company in India in terms of loan portfolio, according to the 2015 update to the IMaCS Research & Analytics Industry Reports, Gold Loans Market in India, 2015 ("IMaCS Industry Report, (2015 Update)"). We provide personal and business loans secured by gold jewellery, or Gold Loans, primarily to individuals who possess gold jewellery but could not access formal credit within a reasonable time-frame, or to whom credit may not be available at all, to meet unanticipated or other short-term liquidity requirements.
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