home-loan

How to Choose the Best Home Loan Provider for Housing Loan

Constructing or purchasing a house is the best decision you could take in life. Since the cost of a house purchase is relatively high, people often rely on loans to fulfil their cherished dream.

However, choosing the best home or housing loan provider is easier said than done. Almost all Indian lenders display their best features to the customers, making it difficult for borrowers to make the right decision.

Intelligent borrowers evaluate the following factors before selecting the best lender:

  1. Tools and Calculators – Reputed lenders offer many free tools and calculators, such as housing loan eligibility calculator, EMI calculator, etc., so that borrowers can make informed decisions. Please check whether your lender offers such features or not.
  2. Interest Rates – Home loan floating interest rates in India are hovering between 7.35% and 9.55%. If your lender offers anything significantly less or more, you must stay cautious.
  3. Loan Amount – Reputed lenders like PNB Housing Finance offer housing loans of up to 90% of the house’s market value. The loan amount plays a crucial role in determining home loan interest rates and EMI in India.
  4. Repayment Term – The repayment term of a housing loan is usually thirty (30) years. However, some lenders also provide a maximum term of twenty (20) years. To choose the best lender, you must analyse your financial capability and select the correct loan term.
  5. Lender’s Reputation – The lender’s reputation and value-added services like doorstep service and online document uploading make the housing loan application and approval seamless.
  6. Eligibility – Generally, any Indian citizen aged between 21 and 60 with a credit score of 750 can apply for a loan. But, some lenders, such as PNB Housing, approve loans to borrowers with a credit score below 750. However, you may have to pay a little more if your credit score is below the benchmark.
  7. Documentation – Lenders require seven to eight documents, including age and address proof, income proof, bank account statement, and property documents, while evaluating your loan application. If your lender asks for anything more or less, it might be a signal to reconsider your lender. 

The Mechanism

When home loan interest rates in India increase, banks and housing finance companies like PNB Housing let the EMI remain constant but increase the loan period. The loan taker is allowed to know about the changes. The increased loan period means an increase in the interest outflow. Hence, before submitting the housing loan application, you must read all terms governing the loan and make the best decision.

What Should Existing Borrowers Do in Case There is an Upsurge in The Interest Rate?

Initially, you may not receive the jerk of boost in the housing loan interest rate, but later on, you may want to shift to an institution offering the same at lower rates. On the other hand, it is also possible that your high rate of housing loan interest from HFC has increased your credit profile. Even then, you may seek to transfer to a cheaper-rated housing loan. So what should the existing loan customers do? Before shifting, make sure that the difference between the current and new rate is above 50 bps and the leftover repayment tenure is longer. Only then you may consider transferring.

Conclusion

Financial institutions are constantly changing positions with their home loan interest rates in India, which might cause tension for you. But be precise with the cost evaluation and then decide to choose the best-suited home loan provider for you.

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