Home Loan
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Taking credit seems a good choice at the start owing to its attractive nature. But many forget that it has to be supported with a good financial backing. There is a need to pay off the loan and interest on time, efficiently and effectively without making the home loan a stressful thing in your life.

Here are pointers that need to take care of when planning to apply for a loan.

  1. Rates of interest

As the name suggest, while the Variable Interest Rate change with the fluctuations observed in the MCLR (Marginal Cost of Funds based Lending Rate) or the minimum interest rate below which a bank can’t lend, fixed interest rates do not change for the entire tenure. The fixed rates are preferred for the longer tenures. However, the variable interest rates allow for maximum gains when rates fall. One can switch from a variable to a fixed interest rate when rates soar but the reverse is not possible as it may add to costs.

  1. Repayment of loans

There are options like part-payment of a loan or foreclosure of a loan. The part-payment of a loan refers to paying a lump sum amount which is not equivalent to the outstanding loan amount. It reduces the burden of loan as it reduces the unpaid principal amount, unpaid interest, and EMIs. A full repayment in one single transaction refers to a foreclosure of a loan. This is subject to the conditions mentioned in the loan agreement and need to be studied in detail before opting for it. Both of them have charges pinned to them and the costs need to be understood. Also, some lenders do not allow any pre-payments in the first 12 months that need to be looked into.

  1. Insurance to safeguard your future

What many take lightly and find as an imposition is Mortgage-Linked Insurance (MLI) Scheme which safeguards the family of a person who has taken a loan in the event of a calamity. If the breadearner unfortunately passes away during the loan period, the effect of the death would not show on the dream house if the investee has taken the insurance.

  1. Go for flexi Interest schemes

One can also opt for flexi saver schemes provided by banks where a certain excess amount can be deposited in the savings or current account linked to the home loan account. The burden of interest is reduced as the interest is accounted on the main principal amount after deducting the daily balance in the savings or current account linked to the home loan account. As and when there is a requirement, the amount can be withdrawn.

  1. Strive for reduction of interest rate on loan

If you have previously taken a loan in the same bank, there are chances that interest rate could be slashed depending on the current rates of interest. If the bank doesn’t pay heed, one can opt for balance transfer to another bank considering the other charges associated with the move. It is necessary to research in-depth, understand the prevailing conditions and watch out the new bank’s terms and conditions.

Remember that a loan should be according to your convenience and should not hamper your daily life. Choose for loan that adds to your life instead of deducting happiness in future.