Guest Post by Finance Man – Bad Credit Personal Loans
It can be difficult to get the best home loan and like with other financial products you need to how a home loan works so that you don’t get any horrible surprises later on. Here are some important things that you need to know before you sign.
You are able to calculate your loan eligibility by calculating the EMI. The installments are usually limited by the banks at 40-50% of the borrowers salary, which is basic plus the dearness allowance.
If you have existing liabilities like another loan then your eligibility will go down. There are banks that are also sensitive in terms of the number of dependents that you have as the more dependents then the lower the repayment capability.
Your profile will also affect the amount that the bank is willing to lend.
People that have a stable source of income for instance find it easier to get a loan then say someone who is self employed with unpredictable earnings.
Your age will also play a role as it determines the number of earning years you have left and your repayment capacity.
There are two types of home loans that are based on interest rate those being fixed and floating.
A fixed rate loan is where the interest rate does not change, but this rate is usually 1-2.5% higher that the floating rate home loan. Floating rate means that the interest rate changes according to market conditions.
A fixed rate may seem attractive, but experts sat that a fixed rate with a home loan can be a disadvantage in the long run as the rates are bound to come down at some point. Fixed rate loans also have a reset clause, which means that in can undergo revision.
The Fine Print
A home loan is a legal document and can be hard to decipher. There can be some details though that are hiding that you need to know about.
For instance you may think that default is only if you do not pay the EMI. There are some banks though that define default as when the borrower expires, divorces or the borrower is involved in any criminal offence or civil litigation.
There are banks that also have a security clause, which entitles them to demand extra security with your loan amount.
You may find that there are also additional charges like administrative and service charges or processing fees.
Negotiate the Rate
You are able to negotiate on the interest rate. This is especially true if you are a loyal customer and have a good credit history and record.
If you have taken a loan from a bank it doesn’t mean that you are stuck with it forever. You are able to switch if you get a better deal somewhere else.