Imagine this: After you’ve decided to buy that dream house that you’ve always wanted, you come across the most perfect one. She’s a beauty in your eyes. You feel a connection to it, so much so, that you’ve decided on what modifications has to be done, and where to place what furniture, et cetera!
This is usually done on the basis that you are confident in your ability to fetch a loan, if need be, and let everything else fall into place.
We don’t want you to miss out on crucial things that could likely prevent you from getting a home loan! Here is a list of 5 crucial mistakes to avoid before taking a home loan!
- Opt for Loans Which Have Shorter Terms
Is it better to pay off loans faster with a short duration term?
Or is a longer repayment period with lower interest better?
Well, it is not hard to conquer the game of loans!
Everyone makes it sound like longer loan terms are better. But paying a low amount every month with less interest works better on only paper. Sure, you can get loans for up to a tenure of thirty years in India. Still, it doesn’t matter if it doesn’t benefit you.
Why not take shorter loans and pay off the loan faster while you still can?
Or you could consider taking a long-term loan and concentrate on pre-closing it at the earliest. Most banks in India do not charge extra for the pre-closure of loans. When personal loans impose more interest when compared to home loans, it might be wise to opt for the latter.
In a comprehensive comparison of shorter and longer duration home loans, the overall interest paid soars high on longer-term loans! While EMI rates for shorter loan terms are high, paying off your loan as soon as possible is highly advantageous.
2. Do Not Have Defaulted Credit Card Statements!
Credit cards are awesome. Everybody accepts it. The customer does not have to pay right away, and no interest needs to be paid for the first forty to fifty days.
Every credit account has a spending limit though, and sometimes, people spend so much on their credit cards that they wouldn’t be able to pay it in full by the time the bill gets generated.
One reason that this could happen is the fact that some people are not aware of the fact that their credit cards have a spending limit attached to it.
This leads to the question: will it affect the prospect of my obtaining a loan? Yes!
Everybody has to be careful with how much they spend because defaulted payments can lead to your loan not being approved! Whatever may be the reason that you give, your loan is most likely to be declined by the credit officer.
But, how much of your credit limit should you use? VantageScore Credit Solutions recommends that ideally, the user use no more than 30% of his or her credit limit.
3. Do Not Submit Multiple Loan Applications!
Many people still do this! The problem associated with this is that submitting multiple loan applications would instil major doubt upon the lender. On one hand, it might lead the lender to think that you have submitted multiple loan applications to buy multiple properties.
On the other hand, it might seriously hurt your credit scores because of the fact that you are asked to submit the proof of your credit history when you are making applications for loans and when you do, the multiple credit scores checks that have been made to your account will seriously lower it.
Moreover, when multiple loan applications are submitted, the lender will tend to think that multiple banks are rejecting your applications. As a result of this, they will reject your loan.
4. Rushing to Get Your Loan Approved
For many people, the world seems to move at a whirlwind pace! These kinds of people mostly choose to opt for the first loan that catches their eye! This is a terrible mistake! Chances of getting a perfect loan, with a perfect term, and an ideal interest rate, increase when you compare all loans which are available, thoroughly!
A loan which is offered by the SBI may be similar in wording to a loan which is offered by say, Axis Bank! But, the underlying conditions and terms would certainly differ at least in some aspect, and hence a careful, and thoughtful approach must be given to this aspect.
It really doesn’t matter if you have already set your eyes on a house that you want right away because eventually choosing the wrong loan scheme could hurt your pocket considerably while paying your dues!
It only translates to being smart on your part if you carefully read through the loan terms and conditions, and choosing which bank to opt for while doing so!
5. Already have existing loans? Do not try to mask them to the lenders!
Trying to hide or cover-up the fact that you already have a couple of pending loans could affect your chances of getting a loan drastically. This is not advisable.
When you apply for a loan, you are asked to submit your credit information so that the banker can duly extract information from there to check your credit scores. When they check your credit scores, won’t they be able to find out that you already have some loans pending? Hence, never try to hide this fact, and doing so would lead the banker in rejecting your loan application, and in worse cases, going to the extent of taking legal action against you.
The bottom-line is that loans can be tricky, and a comprehensive analysis of all loan-related documents is necessary. Additionally, the implementation of smart tactics when choosing your loan, and the bank will really help you in the long run.
Think you have more tips to share? Let us know in the comments below!