Prerna Pandey lists the golden rules you should keep in mind while opting for a home loan
Taking a loan must have become easier over the past few years with constant advertising blaring on television, every other page of magazines and papers have loan offers of various banks. Attractive easy monthly instalment options and other offers are a further a lure for loan seekers. But, just watching these advertisement and reading about the loan in papers won’t give you a complete picture of the whole loaning process. In fact, there are few things that even a banker won’t tell you at the time of borrowing the loan.
So, here are few golden rules that you should always keep in mind before you get excited and go ahead and pick a loan for all the wrong reasons
- Never borrow a loan from any bank or loan proving company on the basis of the offers/gifts that comes with the loan. The bigger the gift offered with the loan is, the more careful you have to be and go through every details of the offer before going ahead with the borrowing process.
- Usually, it is said that the monthly instalment of your loan should never exceed 40 per cent of your monthly salary; but, even 40 per cent seems like a high amount to give away in instalment every month. So, if possible, you should try not liming the EMI to 25 per cent to 30 per cent of your monthly income. Accidents or other unfortunate events don’t come with a warning and it is better to have some money reserved for such unforeseen events.
- Never plan your EMI based on your future salary, the salary you are ‘sure’ you will get in, say, a year. This is one future plan that can backfire, and if it does, it will be nothing but trouble for you. So, even if you are 101 per cent sure about the hike in the salary that you will be getting in your recent future, plan the EMI based on your current salary and if need be rearrange the EMI pattern with the bank again when you get a salary hike. You can even opt for pre-payment option after your raise.
- Most of the banks nowadays don’t charge a penalty for pre-payment of loan. This is another thing to keep in mind while you select a bank for borrowing a loan – see if the bank charges a penalty if you want to make a pre-payment of loan.
- Before getting in to a loan agreement, make sure you have read the fine prints of the agreement. For example, if you are opting for a fixed interest rate over floating one it is very important for you to understand every clause of your loan agreement.
- There is a ‘force majeure clause’ in a loan agreement that allow banks to raise the interest rate according to current market rate under some unavoidable conditions. This makes your fixed interest rate as good as floating rate.
Keeping all these things in mind while getting a home loan will save you from stressful situations in the future.