Neeraj Dhawan, Managing Director, Experian India suggests mistakes to avoid when applying for a home loan
Bengaluru, 25 September 21: Buying a home is an emotional decision, a place where one creates memories that stay with them lifelong. But does everyone plan enough while borrowing a home loan? Are they sure that the home loan scheme is the best in industry?
Borrowing a home loan requires analysis and planning, as it is a long-term and expensive commitment. Getting a loan without proper research may damage anyone’s financial well-being. While applying for a home loan people need to be very watchful so that they don’t end up with an incorrect scheme or incorrect lender.
Neeraj Dhawan, Managing Director, Experian India recommend couple of common mistakes to take it under co nsideration and avoid them while taking a home loan. According to him the first mandatory step before app lyi ng for any loan is to have a healthy credit score. A credit bureau like Experian provides free and unlimited credit reports to the people, which is quite easy and convenient to download. A credit score above 700 may lead to a favourable scheme. This will also give the power to apply for a loan through the best banks. The lenders will eva luate creditworthiness; a poor credit / repayment history will drop the score and the borrower won’t be eligible for good home loan schemes. In India, only 7% of the home loans sanctioned in the industry are given to custom ers with Experian Score 300-700.
Home loans have become quite commonplace and are easily availa b le. With the increasing demand, multiple financial institutions pr ovide customised schemes meeting one’s needs. Hence, it is very important to do a pro per research before applying for a loan from a particular institution. Home buyers needs to double-check th eir requirement, plan their finances, check terms and conditions, identify hidden charges, proc essing fees and fle xible repayment options to name a few and accordingly, select the appropriate bank and sche me. Nowadays, many websites allow people to compare the home loan products offered by different banks. Lack of research may lead them to paying unnecessary charges or higher EMI.
As far as possible, it is advisable to not opt for a shorter tenure home loan. Shorter the tenure, smaller the loan amount. This also leads to a higher risk of default in payment of EMI considering the high EMI amount. The elig ible amount would depend on various factors like age, credit history, and repayment capacity. Also, one need a high credit score and good repayment history to avail higher amount and get favourable terms and conditions. A longer tenure will ease their EMI and meet their financial objectives.
“The biggest mistake which people generally do is to not include their monthly expenses while calculating their repayment capacity. The bank generally looks after anyone’s liabilities while granting a loan. If the monthly exp enses are high and one needs to take a home loan with a higher EMI amount, this may lead to a huge financial crisis. THe EMI outflow generally should not exceed 30-40 percent of the income. One should not depend upon future events such as an increment in the income and instead consider present financial situation before opting for a bigger loan. Looking at the current situation, it is always advisable to do a thorough study of the expenses before applying for a loan or selecting an expensive property”, highlights Mr. Dhawan.
Home loan borrowers should take proper insurance cover to protect their families from financial distress. In ca se of any unforeseen contingency, the home loan insurance can help the family to clear off the dues. Multiple in surance products cover home loan, like taking a life cover which includes your liabilities. Not securing the liab il ities is a risk which most borrowers do not recognize. It is highly recommended to take cover to protect the fa mily members from any financial burden.
