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The dream, of many, is to buy a house of their own—a place they call home. When the finances to buy one isn’t sufficient, a Home Loan comes into play. Choosing the right Home Loan, from the right vendor, depends on a variety of factors like Home Loan interest rates, benefits, and repayment options.

While some elements of a Home Loan remain constant throughout the tenure, there are a few factors that change.

Some of these variable factors are:

  •        Interest rates

For some Home Loans, borrowers see interest in the form of a floating rates and not fixed rates. This floating rate of interest is subject to change periodically, thanks to market fluctuations. An understanding of how the two types of interest rates would affect your finances would help you choose your Home Loan wisely. If the interest rate is a floating one, factor that into your budget every month, along with ample wiggle room to manage other finances.

  •        EMI

The EMI for a Home Loan can change several times during the repayment period. The reason for which can be attributed to several factors.

·         Getting a salary hike

·         Readjustments after a partial payment

·         Extending/shortening a loan tenure

·         Change in rate of interest

·         A Home Loan Balance Transfer

Your EMI can be readjusted during the tenure period, especially if you want to shorten the time taken to repay it.

  •       Outstanding amount

With partial prepayments, you can work towards paying off your loan faster. Most banks and NBFCs allow a certain number of partial prepayments, which can help you lower the outstanding loan amount. When you make a partial prepayment, you’ll save the interest charges you would have paid during the normal course.

  •        Tenure

A home loan tenure is flexible, and you can either extend or shorten it depending on your financial requirements. If you shorten the tenure of your loan, the monthly instalments will increase significantly, so don’t take this step unless you’re prepared for it.

  •        Age and career length

Your age and the number of working years you have left are vital to Home Loans. If you have a Home Loan, and you seek a Top-up loan or Home Loan Balance Transfer towards the end of your career, there are chances you might not get it. At the start of a career, a person has both age and time on their side, which is why they’ll be able to afford the decades-worth of repaying. This assurance, couple with their potential to get salary hikes in the near future, make younger applicants reliable borrowers.

Are you eligible?

Other than reading about the different aspects of a Home Loan before applying for one, you can also check whether you are eligible for it. With the aid of a housing loan eligibility calculator, you can check if your current financial status will allow for a Home Loan.

The basic factors that govern Home Loan eligibility are

1.       Income

2.       Property and its value

3.       Credit score

4.       Current employment status and location

5.       Overall ability to repay the loan

If the eligibility criteria of the bank or NBFC are easy to meet, you can apply for a loan. If you apply online, you will need to submit copies of your ID, address, and income proof along with the application after which a representative will call you to set up an interview. Once all the documents have been verified and the property has been evaluated, your loan will be sanctioned. Depending on your financial capability to repay debts, your loan amount and tenure will be decided.

How to repay your loan faster?

Once you’ve applied for your loan and have got it sanctioned, you will have to start the repayment process. For a Home Loan, the time frame to repay the loan can range anywhere from a couple of years to decades—it all depends on your repayment capacity.

If you want to free yourself from your Home Loan as quickly as possible, here are a few tips to consider:

Scrutinise your financial plan

Before taking on a debt, remember to take a good look at your financial plan. Check whether the income you get is enough to meet all your lifestyle and basic needs, and EMI payments. Once all the bills have been paid and the groceries have been bought, see if there are any surplus amounts. If there are, use that money as prepayments for your loan and shorten the tenure.

Increase your EMIs

By consciously increasing your monthly instalments, you can shorten your tenure significantly. Even a small increase of Rs.1000 would go a long way in cutting down the tenure and closing the loan account quickly.

Sign up with a co-applicant

If you have a spouse or a sibling with whom you can share the Home Loan, consider enlisting their help. A joint Home Loan would be beneficial as it would entail a higher loan amount. Also, the burden of paying large EMIs would be split between two people, with two incomes.

While the prospect of a co-applicant has its benefits, there are demerits to it as well. So, make sure you do ample research before opting for it. Choose a person who you can rely on to pay their portion of EMIs regularly, thus staying away from the risk of defaulting.

After you’ve considered all the elements that come with a Home Loan and are sure that the loan would do more help than harm, apply for it. In the end, the loan should act as a financial solution to you rather than one that adds to the duress.

 

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