Purchasing a house or investing in a property entails a significant financial investment. However, not everyone has such a large sum of cash readily available and liquidating an investment prematurely often leads to financial losses that are not always justifiable.
So, what is the alternative? Well, housing loans are a great way to solve this crisis. But what is a home loan? Read along to find out.
What Are Home Loans?
A housing loan is a sub-type of secured loan where you, the borrower, apply for the funding necessary to purchase a property. Here, you keep the property as collateral and avail funds against it to buy it.
Nevertheless, once obtained, you must repay the loan per the terms and tenure agreed with the lender.
How to Apply for a Home Loan?
The application process for a home loan is very simple and hassle-free. All you need to do is choose a lender with the best interest rate and loan terms; then, you can apply. There are two ways of doing that, online and offline.
Online Application Process
Step 1: Go to the official website or mobile application of the financial institution
Step 2: Head over to the home loan section and find the option to apply
Step 3: Provide all the personal and professional details in the online form
Step 4: Scan and submit the required documents and submit the application
After this, the lender will review the paperwork and provide you with approval if you qualify as per their requirements. At this point, a representative from the financier will get in touch with you to complete the further processes.
Offline Application Process
Now, if you want to apply offline, you can visit the nearest branch office of the lender. Once there, fill out the loan application form with all the relevant details and submit the required papers. After that, you will get notified once a decision about your application has been reached.
To complete this application process seamlessly, you must meet all the eligibility parameters set by the lender and submit the necessary papers.
Eligibility Criteria and Documentation for the Home Loan Application
Every financial institution has eligibility criteria for loan borrowers to determine if the borrower should get a loan. First is the applicant’s credit score, which determines the borrower’s creditworthiness and shows the borrower’s past loan repayment records. After thoroughly reviewing all the documents, the lender decides to either approve or reject the loan.
However, there are some other criteria mentioned below:
- Age of the applicant: 21 to 65 years
- Employment type: Salaried and self-employed
- Annual salary (minimum): As per the specifications of the lender
- Residency status (Resident/Non-resident Indian)
- Continuity of occupation, assets, liabilities and stability
These are the basic parameters you need to fulfil to secure a housing loan. However, the particulars of these will change as per the requirement of your preferred lender, so visit the lender’s official website to find out more.
Moreover,the documents for a home loan application are mentioned below:
- Identity prooflike Voter ID card/PAN card/Aadhaar card, Passport, Driving License etc.
- Residence proof like Telephone/electricity bill
- Application form with photographs
- Bank account statements for employees and self-employed individuals
- Salary slips of salaried individuals and ITR of self-employed individuals as income proof
- Property papers
As specified with the eligibility parameters, the exact list of documents will be as per the requirement of the lender you choose. So, check with the loan provider in advance and keep those papers handy to avoid any delays.
What Are the Benefits of a Home Loan?
There are various benefits of taking a home loan. Some of them are:
- Tax Benefits: A housing credit permits you to apply for a tax deduction on loan interest repayment and the principal amount. According to Section 80C of the Income Tax Act, 1961, you can get a rebate of up to Rs 1.5 lakh on repayments of the principal amount. Also, you can get up to Rs 2 lakh for the interest payment of home loans as per Section 24 (b).
- Lower Interest Rates: Compared to the other loans available in the market that can help you fund a property purchase, the interest rates on home loans are lower. Moreover, you can apply for a top-up loan on the existing housing loan if you need to meet any unexpected financial needs for your home.
- No Prepayment Charges: Home loans do not charge any prepayment penalties, unlike other loans. So, whenever you have money at hand, try to make prepayments. It will help you in closing your loan sooner and lower your burden.
- Longer Tenure: Home loan has the advantage of having longer tenure. It can go up to 25-30 years. Sometimes it depends on the loan amount you are applying for. This longer tenure reduces monthly EMIs, which in turn, lowers your overall financial monthly burden.
- Due Diligence: When you get a home loan, banks tend to check the property you are willing to buy from a legal perspective and make sure all the provided documents are valid and verified. After evaluating everything, the bank decides whether to approve or reject your loan application. This due diligence prevents you from getting scammed, and passing due diligence can also validate your property.
Having your own home or buying a new home is a dream of every individual. But doing so is an expensive affair. In times like these, you tend to seek financial assistance that will supplement the budget you have set, and you can do this by taking a home loan. Moreover, applying for this loan is also simple, making it even more accessible.
Having said all this, do not forget to read the loan terms and clarify all the doubts to avoid facing issues in the coming days.
