Updated: Feb 14, 2022, 18:09 ISTShare:
One of the most critical aspects of taking a Home Loan is choosing the loan provider. Some of the most vital aspects of selecting a lender are discussed in this post, to help you make the right decision.
A home is probably the biggest purchase most people make in their lifetime. The majority of the buyers depend on housing finance to fulfil their dream of being a homeowner. But while the accessibility to Home Loans has improved significantly in the last few years, most borrowers find it difficult to choose a loan provider.
As Home Loan is a big-ticket loan, it is essential to be as careful as possible while deciding. If you are struggling with the selection too, here are a few points that can help:
1. Bank or HFC?
One can take a housing loan from a public or private sector bank or a Housing Finance Company (HFC). While HFCs have a reputation for being flexible regarding the eligibility criteria, the interest rate offered by them is linked to the prime lending rate, which can sometimes be higher than the interest rates offered by banks.
This also means it can take longer for HFCs to pass the RBI’s rate cuts to the borrowers. In a falling rate regime, this could prove more expensive for the borrowers. Even in terms of loan processing fees and other penalties, HFCs are generally expensive than banks.
2. Fixed Interest Rate or Floating Interest Rate
Whether you take a Home Loan from a bank or an HFC, you’ll have to choose between fixed and floating rates for your loan. As the name suggests, with fixed-rate loans, the interest rate remains the same throughout the loan tenure. If you go with the floating rate, the interest rate will fluctuate according to market conditions and also impact the monthly EMIs.
It is generally recommended that borrowers take Home Loans with floating interest rates in a falling rate regime. But, if you want more certainty about the monthly expenses and budgeting is a matter of concern for you, you can opt for a fixed-rate loan.
Do note that most banks allow you to convert your loan from a fixed-rate to a floating rate or vice-versa by submitting an interest rate conversion request.
3. Eligibility Criteria
Before applying for a Home Loan, one should also closely analyse the eligibility criteria of the lender. While the requirements vary between lenders, they mostly revolve around the borrower's monthly income, credit score, age and existing liabilities.
Go for a loan provider whose eligibility criteria you can fulfil comfortably. After applying for the loan, if the lender finds that you do not meet their eligibility requirements, your loan application will mostly be rejected.
4. Additional Facilities
As housing loans are generally taken for 15-25 years, the borrower will have a long-term relationship with the Home Loan provider. Thus, it is also important to consider the additional facilities or features offered by the loan provider. For instance, a few banks offer a step-up loan facility, which boosts the loan eligibility of the borrower.
Customer support is another vital consideration before selecting a lender. EMI payment flexibility, loan approval duration and documentation are some other factors that deserve your attention.
Choosing the Best Home Loan Provider
Top banks in India are known to offer Home Loans at attractive interest rates while also allowing borrowers to choose between a floating and fixed interest rate. With features like digital loan sanction, PMAY subsidy and world-class support, they ensure that the entire experience of taking and repaying the loan is highly convenient and simple.
Compare a few top banks, based on the points listed above, to make the right decision and fulfil your dream of being a homeowner at the earliest.