Most of us are aware that buying a house is an emotional decision. Unlike another type of loans, a home loan requires well throughout analysis and planning due to being long-term and having a larger amount attached to it. But have you planned your home loan application thoroughly? Have you thought out the details? For example, how are you going to pay for your 10 Lakh home loan EMI or 15 Lakh home Loan EMI? What fund to use in case of emergency? In order to ensure you don’t end up with a lender or a product that doesn’t suit you, we have narrowed down the top mistakes people make while applying for a home loan.
Lack of proper research: Due to the rising demand for home loan, numerous financial institutions offer customised schemes that are tailored to each individual. Therefore, it is crucial to conduct thorough research before submitting a loan application to a specific lender. Borrowers must double-check their needs, make financial plans, review terms and conditions, identify hidden costs, processing charges, and flexible repayment options, to name a few, and then choose the proper bank and scheme based on those considerations. You can now compare the home loan products provided by several banks on numerous different websites. Lack of research could result in you paying increased EMIs such as 15 Lakh home Loan EMI or other fees.
Not evaluating your own creditworthiness: Having a good credit score is the first step before submitting an application for any type of loan. Credit reports are offered by a credit bureau and can be downloaded quickly and easily. A credit score above 700 can get you a good deal. Additionally, it will enable you to secure a home loan with a low-interest rate on 15 Lakh home Loan EMI. Your creditworthiness will be evaluated by the lenders. Poor credit or payback history will lower your score, and the borrower won’t be eligible for good home loan schemes.
Choosing shorter terms: It is advised not to choose a home loan with a shorter term as much as possible. It is indeed true that the shorter the tenure, the smaller the loan amount would be, but it also leads to a high risk of default in the payment of 10 Lakh home loan EMI considering the high EMI. A number of variables, including age, credit history, and repayment capacity, will affect the amount you are eligible for a home loan. In order to receive a larger loan amount and favourable terms and conditions, you must also have a high credit score and a solid repayment record. A longer tenure will ease your EMI of 10 Lakh home loan EMI and help you meet your financial objectives.
Overestimating your ability to repay: The biggest mistake that most people make is forgetting to factor in their monthly expenses when determining their ability to repay. Typically, the bank considers your liabilities before approving a loan. If your monthly expenses are on the higher side and you take a home loan, it may lead to a huge financial crisis. Generally speaking, your 10 Lakh home loan EMI outflow shouldn’t be more than 30 to 40 per cent of your income. Before choosing to take out a larger loan, you should take into account your current financial status rather than relying on future situations like an increase in your income. Knowing your expenses before requesting a loan or choosing an expensive property is always wise, given the current situation.
Not Taking any Insurance Cover: If you are paying a 10 Lakh home loan EMI, it is imperative that you should think about having insurance coverage. Home loan borrowers should take the appropriate insurance coverage to shield their families from dire circumstances. Home loan insurance can assist the family in paying off the debt in the event of any unforeseen circumstances. Home loans are covered by several types of insurance covers. It is suggested to take out a life insurance policy for a sum that covers your debts. The majority of borrowers are unaware of the risk involved in not protecting their liabilities.
Your ultimate objective should be to avoid making your home loan of 15 Lakh home Loan EMI a stressful financial responsibility. Keep in mind that emergency situations might happen at any time, which could cause problems with repaying future EMI.
Not saving enough money for the down payment on a home loan: As you may already be aware, your lender will only loan you up to 75–90% of the value of the property and based on that, the amount of EMI, for example, 10 Lakh home loan EMI will come up. Before you may get a loan, the remaining money must be paid in the form of a down payment or a margin contribution. Therefore, it is crucial first to make sure you have the appropriate corpus on hand for the same. Remember that you don’t have to sacrifice your other emergency funds in order to cover the corpus. It’s very risky. Additionally, if you can, try to put as much money down to lower your overall loan amount and receive a better loan arrangement on 15 Lakh home Loan EMI.
Falling for teaser loans: The State Bank house loan programme, sometimes known as the “8% programme,” is a great programme, but it does not cost only 8%, except for the first year. Many lenders today provide cheaper fixed interest rates for the first few years before switching to standard floating rates. Understanding how such changes would affect total costs is crucial.
Not considering applying with a co-applicant: Having a co-applicant alongside you can help you increase your borrowing limit. If your credit score is below average, the co-applicant might increase your chances of approval and lower the interest rate that will be charged, provided they have a decent to excellent credit score.
Already in debt while applying for the home loan: Ideally, you should strive to pay off the smaller debts first if you have already taken out a number of loans before applying for a home loan. Your ability to repay debts can be significantly reduced by current EMI obligations, which may prevent you from being approved for a large loan like a home loan. Additionally, even if you are approved for a home loan, your combined debt responsibilities may put a strain on your budget. The general rule is that your monthly income shouldn’t be exceeded by more than 40% of your total EMIs.
Conclusion
For a home buyer, repaying home loan EMIs can drain you financially, as missing one EMI could hamper your credit score and attract penalties. The interest component of the loan further adds to your woes but having a proper plan in place ensures repaying the loan amount doesn’t become a hassle. Before applying for the loan, make sure it doesn’t go beyond your disposable income.
