Applying for a home loan: Be aware of these 3 myths
Post the pandemic, there has been a significant increase in people wanting to purchase or invest in properties/ houses. Internet is usually the one-stop solution for most when it comes to seeking information on basically anything. However, with the increase in the User Generated Content outlets on the internet, it may not be the case anymore. The internet is a huge, chaotic space filled with a wealth of knowledge. Although it provides some useful information daily, it can also provide you with false information at times.
A home loan is a financial service provided by many banking and non-banking institutions. It is a significant undertaking by someone. Hence one needs to do thorough research when it comes to availing it. Home loans are one of those things that have truckloads of wrong information — myths in other terms—circling the web. Let’s debunk a few of the popular myths here:
Low interest is the best way to go
This is one of the most common home loan myths, not just because it isn’t true, but also because such a statement doesn’t tell you the whole fact. The interest rate charged is decided based on multiple factors. The customer’s credit score, monthly income, Banks and other lenders are, first and foremost, for-profit businesses, and their marketing strategy revolves around attracting new clients and sales. They try to do this by attracting people’s attention with numerous appealing deals such as low-interest rates. However, the fact is that in such situations, lenders try to cover a lot of items in their terms and conditions to compensate for the money they are allegedly losing. For example, they can impose additional fees such as a lawful valuation fee, a processing fee, or a prepayment penalty. You can always apply for a home loan online and inquire about the additional charges for any additional charges before finalising on a lender. When you pay all the fees mentioned above, the lenders would have more than made up for the money they would have lost if they didn’t give the low-interest rate.
Longer the tenor, the lesser the EMI
Even though the statement seems true, it a big myth. While a lower EMI number may seem appealing, there is a catch. When a bank cuts the interest rate on an instant home loan, it usually reduces the loan’s term by holding the EMI steady. Of course, one may ask the bank to reduce the EMI while keeping the term the same. Earlier the repayment of the loan, the lesser the interest rate one pays. While opting for a shorter loan tenor can lead to high EMIs. High EMIs can put a serious dent in your monthly budget, thus leaving you with little to no money for financial emergencies. The home loan app comes with a calculator which helps in understanding, planning, and estimating your loan and EMIs better.
Always opt for a fixed rate of interest
This is another myth and one that has some merit. To continue, both fixed and floating interest rate for your online home loan have their own set of benefits and drawbacks. While a fixed interest rate loan gives you an identical EMI figure to pay per month, it ignores any potential interest rate decreases. A floating interest rate loan, on the other hand, takes exchange rate fluctuations into account and adds them to the amount of interest a borrower would pay. Before deciding on an interest rate scheme, it’s best to match offers from various lenders. There are lenders promising loans with interest rates but think twice before signing that loan agreement.
Apart from the top three, the most common myth related to a home loan is lenders do not accept your application for a loan if your credit score is low. You can apply for an online home loan at ease from the comfort of your home. While a good credit score essential parameter for most Housing Finance Companies (HFCs) do make concessions for customers with low credit scores. The only drawback would be a higher rate of interest.
Bajaj Finserv offers an instant home loan of up to Rs 3 crores at affordable interest rates and quick disbursal. Since the top 3 home loan myths have been debunked, you can apply online with their home loan app in a few easy steps.