A home loan is nothing but just a secured loan that is offered to purchase a house or property by offering it as collateral. Home loans offer high funding at a very low rate of interest for an extended period. An individual needs to repay the loan through EMIs. After the repayment, the property's title is returned to the primary owner.
You may find different types of home loans; some of them are listed below.
- A Home Purchase Loan:
It is one of the most common types of loan available. Various public banks, housing finance companies, and private banks provide housing loans, where you can borrow money to purchase your dream house. Home loans give you 80% of the house's market price. - Home Improvement Loan-
getting a home loan is better and more convenient when you are already in possession of a house. Here the financial institution will offer you a specific loan amount based on your property so that you can repair your house. - Land Purchase Loan-
A financial institute offers you a home loan to purchase land so you can build your house on it or sell the property when the price rises. - Home Loan Balance Transfer-
Here, you can transfer your outstanding loan to someone else's account to experience better terms and conditions and a low-interest rate.
What are the Benefits of Taking a Home Loan?
- Low-Interest Rate-
The report shows that the home loan interest rate is very low compared to other types of loans available. If you face any difficulty, you can get an additional top-up on the ongoing home loan at a low-interest rate. Taking a big loan amount always need more interest to pay. On the other hand, putting something as the mortgage will help you in lessening the interest rate for your loan.
- Long Repayment Tenure-
Unlike other forms of loans, home loans come with longer repayment tenure of 25-30 years. Breaking the principal and the interest for a more extended period reduces the monthly EMI, and as a result, it reduces the borrower's burden.
- Balance Transfer Facility-
One can quickly transfer their home loans from one account to another for various reasons such as service charges, interest rates, customer service experience, etc.
The Interest Rate of a Home Loan-
The average interest rate varies between 6.5% to 12%. However, the amount of loan you are taking is something that the loan amount is dependent on. depending on the terms and conditions of the bank or financial institute you choose. The interest rate usually varies based on the repo rate, economic activities, inflation, and other factors.
Some financial institutes also offer a special privilege to bank staff, senior citizens, and women by offering them a 0.05% concession on the total interest rate. Moreover, a home loan's interest rate can be floating or fixed, and a fixed rate remains the same for a certain period.
On the other hand, during floating rate home loans, the interest rate mainly varies based on market fluctuation. It is difficult to say who will be beneficial: the bank or the borrower.
Eligibility-
Banks have specific eligibility criteria to follow to get a home loan. The first thing that every bank considers is the client's credit score and history to understand their repayment activities. You must have to have a minimum credit score set. You can expect 90% finance from the bank if you own a good business or the job you have is a permanent one. A few other factors that are considered are:
- Employment type
- Minimum annual salary
- Age
- Margin requirement
- Residency status
Conclusion-
If you have been maintaining the minimum credit score properly, then you can easily get a loan from any financial institute or bank. Also, before you take a loan, make sure that you have gone through the bank's terms and conditions thoroughly. In fact, you can also use the EMI calculator to know the monthly amount you need to pay, and you can consult a bank to know more about the process and the entire terms and conditions. Compare different banks to see which bank offers you the lowest interest rate.
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