You may choose to take out a home loan when buying a property for a number of reasons. It could be because you do not have that kind of money and you can earn well enough to pay off your EMI, or it could be that you have the money but you want to use it to make more money and faster than the interest rates. Whatever the case may be, if you plan to take out a home loan, you are prone to a couple of pitfalls.
Once you are aware of these five common mistakes, you will have a better idea of how to go about taking the home loan path to buying your house.
Ignoring Your Cibil Score
Cibil is an agency that rates your creditworthiness, as in, they give you a score out of 900 to indicate how much should banks trust you in loan matters. Knowing this score can be a bargaining tool for you. If you have a good score, one that is above 700, it will give you more options to negotiate for better loan terms. You can ask Cibil directly to provide your Cibil score to you.
Applying for Other Loans as well
So you’re looking for a home loan but are simultaneously applying for other loans as well, like personal loans and credit cards. It does look poor on you as you’ll look ‘Credit Hungry’ and Cibil and the banks will usually blacklist you as a financial risk. When taking a Loan against Home, make sure you free up all other loans six months prior and just focus on the home loan.
Picking the Wrong Bank
It is easy to just go with the bank you are most familiar with, when the truth is that you could have found a better deal elsewhere. Do not shy away from looking for more options. Go to as many banks as you can and even ask your friends and family which bank they chose for their loans and why. There are more factors to consider than just offered interest rates, such how their services are, what their system of calculating fluctuating interest rates is, etc.
Ignoring Pre-Approval from the Bank
Do not ignore the pre-approval on your loan as banks offer it willingly and for free. Getting a pre-approval from your bank will cut down on the overall time, and makes the processing of your loan much easier when the time comes.
Getting Attracted to Big Loans
Bigger is not always better when it comes to home loans. Just because a bank offers a bigger loan doesn’t mean you should take it. Sure, you could buy a bigger house, but you will also carry a bigger burden. When taking a home loan, your goal should be to nullify it as soon as possible. So get a lower home loan, pay a higher EMI for a shorter tenure.