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29 October 2010

Selecting Criteria of Financial Institutions for Home Loans

Selecting the best offer from an financial institution for applying for a home loan is a tricky choice. Various factors have to be considered and deep study of interest rates, EMI’s and other administrative fees as well as loan processing fees must be considered. Every individual can prioritize their requirements and repayment capacity and thus select the best available home loan from offers in that area or locality.
Government financial institutions and nationalized banks are the preferred sources because they are reliable and they also offer reasonable interest rates on the loan amount. Usually they also have a longer tenure for repayment hence the EMI’s are also low. Private lenders have easy availability of home loans and less time is required for processing but usually they have higher interest rates and lesser tenure for loan repayment hence leading to higher amount of EMI’s. It is also noticed that on default on the part of borrower or delay in payments private institutions may resort to unconventional means for loan recovery.
One must be vary of financial institutions that boast of lower interest rates. Usually they have heavy upfront payments which offset the low interest rates for e.g. a co-operative bank may ask you to compulsorily purchase its shares during the processing of home loan for which you will have to shell out a substantially big amount. Others may quote transfer fees of home agreement and administrative costs as a much higher figure. Taking loan from a reputed institution involves their security and support and they have set rules in case of failure to complete the loan repayment.
Discussing and considering all these factors before going in for a home loan helps to ease out many problems faced during processing of home loans. Also accept the fact that loan amount will be much higher than the principle amount of the house as interest rates are added to this. Hence one must think and then go in for selecting the best institution offering home loans. The loan repayment capacity of the individual and how it will increase over the years also must be considered before deciding on the EMI’s to be paid regularly.

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