Home loans – 10 mistakes to avoid

Home loans – 10 mistakes to avoid
June 21, 2019 | Architecture

Home loans are a useful and extremely necessary financial scheme that can give wings to your dream home even when you cannot afford to empty your pockets on the same. It has been a blessing to millions of Indians for whom home is more than just a place to stay; a home is considered an important landmark in life. Home loans have now become easily accessible, and with lower interest rates, it is every man’s piece of cake. But caution is to be exercised when dealing with schemes that involve significant sums of money. Thus, let us go through some of the common errors and miscalculations that can occur when you choose home loans, so that you are not in the dark when choosing the right one for you.

1.Interacting with the Direct Selling Agent (DSA) only

Home loans as in many banking schemes are usually facilitated through intermediaries like a DSA agent. He explains to you the various schemes and options available and makes paperwork convenient by showing up at home and having the proceedings done then and there so that you can avoid many trips to the bank. But be wary that they also operate for commissions or achieving targets, so you need to confirm with the bank directly regarding the terms and conditions of the scheme before getting fully invested in it. Do not get cheated by extravagant schemes that are quite unbelievable, do confirm the terms of the agreement before you proceed with it.

2.Rejection of Home Loan

Small banks and PSUs in rural areas can impose certain criteria for the qualification of your home loan. They may coerce you to be part of a bundle financial project to approve the validity of your loan. This approach can almost sound threatening to uninformed applicants. In case of any such issues where you are being forced to join bundle schemes, be sure to contact the bank’s regional manager to know your rights regarding the same.

3.Fraudulent Charges levied

Be vigilant of the money you pay as petty cash to the direct selling agent, irrespective of the reason. Ask the direct selling agent for proper explanation and for the receipts of the sum you hand over. The processing of home loans does not require any additional payment except for notarization of your documents. The persons who are in immediate need of money or who have had their loans rejected before are the ones who succumb to this unhealthy trend.

4.Blind Signatures on documents

It is common knowledge that you should not sign on blank sheets of paper or documents with contents that you are unsure of. It applies to home loans too. As the marketing tagline goes, “Please read the offer document carefully before investing.” If you have any concerns regarding the terms and conditions mentioned, do consult with the bank or look for other flexible options that are in plenty.

5.List of Original Documents submitted

This mistake is one that will leave you reeling once it happens to you. Original Documents are valuable and keeping it at any other place than your own poses a significant amount of risk. The only precaution you can take is to keep track of your originals at the bank from time to time, and to get a sealed acknowledgement slip from the bank regarding the documents in their custody. Home loans are prone to loss of documents and it is advisable to check back on them especially if you are submitting your papers as installments.

6.Low funds for down payment

Home loan rates are pretty much approachable and convenient these days and the cap on maximum amount has also increased drastically. This tempts people to opt for schemes that are way beyond their payment capacity. It is a known fact that banks offer loans for up to 80% of the property value. The remaining 20% has to come from the borrower as the down payment. The down payment has to be made initially before the loan is disbursed to the borrower. It is key to have that 20% to invest in or else your efforts may be in vain and it can become an additional burden on you.

7.Wrong choice of loan

This decision is crucial since loans are a long-term commitment and you need to streamline your choice to fit your budget and to fund your dreams. Home loan varieties are aplenty from floating interest rate home loans, home loans with overdraft, fixed and semi-fixed home loans to EMI options too. Picking the right choice after careful deliberation and clear understanding of its implication can benefit you rather than piling up additional charges that you did not anticipate, in the future.

8.Uninsured home loan

Securing your home loan with an insurance cover ensures that in case of the unforeseen, your family is not left with a spiraling debt. The home loan insurance ensures that the dependents of the borrower are not left homeless in a crisis in his absence due to contingency, illness, death or accident.

9.Short tenure loans

It is wise to exercise a realistic timeline for the repayment duration of your home loan. The tenure of loans extend up to a good 30 years, give or take a few years depending on eligibility criteria. You can pay off your debts earlier if you can, in a couple of years and not be subject to any penalty. But when you jump into a short tenure loan and can’t repay it within the stipulated time, extra charges and penalty are levied which can further drag up the sum you have to pay.

10.Not comparing various schemes and options.

Do thorough research before you finalize on your choice of loan. You can consult your trusted bank or direct selling agents, or if you love spending time online, there are a number of websites that compare loan options for you to choose the one that fits into your requirement.

Home loans are a boon to building your bright future even when you do not have that kind of money to invest in the same. Careful and informed decisions can make your home loans work for you rather than the loan making you work to repay the burden.

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