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Buying a home is a once-in-a-lifetime opportunity, which is why choosing the best home loan product becomes crucial. As a borrower, you should exercise caution and obtain enough information to make an informed decision before taking such a major step.
A roof over your head is a basic necessity and a home loan is a tool that enables you to do so. But even a slight mistake in choosing a home loan product can be an unnecessary burden and increase the cost.
However, a great strategy can help ensure that your financial goals are not interrupted. Here we have listed some essential things to keep in mind before applying for a home loan.
Keep the affordability factor in mind
Although there are many options available for a home loan, affordability is the critical factor to consider. Home loans are a long-term repayment commitment, and not being able to pay EMI can increase interest charges and ruin your credit score.
So consider your income stability, current and future earning capacity, and other factors to decide if you’ll be able to comfortably manage your financial goals after taking out a home loan.
Find out about interest rates
The interest rate on a home loan also plays a vital role in deciding whether to take out a loan and which lender to choose. Other than that, you need to know the different types of interest rates offered by banks and housing finance companies. Therefore, select the digital lending platform to compare loan options offered by multiple lenders.
This will help you save for other financial needs.
Choose the term of the loan carefully
When choosing the term of a home loan, you must be careful when deciding the final term of the loan. There are two approaches to choosing the term of the home loan, depending on your budget and your needs. If you opt for a short-term loan, you must pay a significant EMI. Although this lowers the interest rate, it can stretch any financial budget.
On the other hand, if you choose a long-term home loan, you will end up paying a lot of interest for the end of the loan term, even if you pay a low monthly EMI. Therefore, choose a loan term that does not strain your budget or burden you with an EMI burden.
Take a look at your credit score
Lenders consider a credit score of 750 or higher to be favorable. Consumers with such scores have a higher possibility of loan approval. But, if your credit score is below average, they will charge you a higher interest rate on a home loan. So, when applying for a home loan, make sure your credit score is good and take steps to prevent it from dropping in the future.
Consider the partial prepayment option
Choose banks that won’t charge you a fee if you make partial repayments on your loan. If you have extra income, use it to make partial repayments on your loan. This type of partial payment reduces your loan amount and your loan interest expense. It will also help to close the loan before the term of office.
Buying a home is a once-in-a-lifetime opportunity, which is why choosing the best home loan product becomes crucial. As a borrower, you should exercise caution and obtain enough information to make an informed decision before taking such a major step.
This article is written by Pramod Kathuria, Founder and CEO of Easiloan
First post: STI