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27 April 2011

Bank Teaser Rates and Home Loans

As we all know that as the rates of property are shooting up, at present the market for purchasing homes and applying for home loans is at a low stage. People are hesitating to apply for home loan as the prices of property are much higher and the builders are not willing to budge with the rates per square feet. All this leading to much higher rates of a small two bedroom hall kitchen or a one and a half bedroom hall kitchen costing a crore or more!
The market trends indicate that buyers are quiet and waiting patiently for the rates to drop. Financial advisors and managers are of the opinion that rates are not going to drop as the demand is always higher than the supply. It may be possible that the market for homes may stabilise and sales may pick up in the near future.
We often hear that RBI and other banks are offering loans and about their teaser rates. Many nationalised banks and other private banks are offering home loans at a very low interest rate. This offer is valid upto the month of May 2011. This may be an opportunity for buyers to make the move of purchasing a new home and apply for a home loan. Since nationalised banks are the best due to their low interest rates and stability in financial dealings many buyers opt for loans from these finacial instituttions rather than private lenders. Here they may get loans at cheaper rates but there is always unsure factor in case of delay in repayment or other problems coming up unexpectedly during the loan repayment tenure. Nationalised banks have rules for recovery and they may also help out individuals in case of default by recovering the loan amount by sale of property or other assets. Private lenders may offer loans at cheaper rates but they also may have unfair means of recovering the loans in case of default in repayment of the EMI. Hence the common man is much comfortable with home loans from nationalised banks as they are safe and secure and always follow certain rules and regulations.
Buyers after the 'wait and watch' and a slack of months according to market analysis, in the trend of home  buying, are more positive about the rates. I do not think there will be any more difference or fall in property rates. The offers are many and builders and loan lenders have saturated their options for offering homes and loans at cheaper rates. The buyer who needs a first home is at a tight spot since homes are becoming much dearer in terms of money and EMIs. It would be advisable to jump to this teaser rate offer in case you do have to purchase a home since if the decision has to be made, then it is better to watch out for best and cheapest home loans!

20 April 2011

Checking Home Loans Availability Becomes Much Easier!

Today's headlines in DNA did make a positive move for the buyers as well as sellers in the field of home loans.
Making easy availability and application process regarding home loans is the most important point for any lender, and borrowers are out to approach those lenders who provide hassle free loans at attractive interest rates. Now it is possible to check directly if you are eligible for a home loan and that too for a nominal fee of Rs. 450.
Cibil is an organisation, a group of financial institutions and banks who have come up with certain rules and regulations and measures to follow regarding credit infromation reports and credit scores. Cibil (Credit Information Bureau India) has announced the opening of TransUnion Score system for the public. Any individual can access their credit score by paying the nominal fee and come to know their credit rating and financial standing in terms of loan approval and repayment. Since the credit information report contains personal and financial information of the borrower the lender is more than happy to go through this report and come to offer loans to individuals who have a high score.
This score is measured in numbers ranging from 300 to 900. It is always a 3 digit score and the more higher the score the better the rating, and the more chances of your home loan approval. This score is calculated after considering a person's credit history and his loan repayment capacity. His past loans and the repayment schedules do matter when the lender considers any home loan application. Sanctioning a loan amount of 25 to 50 lakhs or more, does require critical scrutiny from the lender as they have to see that the borrower has the capacity to the repay the loan amount taken within the time frame and calculated EMIs.
Checking your credit score is beneficial to both the lenders as well as the borrowers. Lenders are very happy as the risk factor, which they have to consider whenever they offer an amount as loan is reduced to a paper score. Many hassles are removed and one glance at this score will immedaitely indicate whether the borrower is a good customer for offering loans or not. Their past repayment capacity and their financial standing will clearly indicate in a much better manner how the borrower will repay the loan.
The borrowers will also benefit with this move by cibil of opeing up a TransUnion Score System. As they get credit infromation report regularly they can now come to know  their personal credit rating. According to this they can plan beforehand regarding application of home loans or any other loan. Increasing chances of approval is the foremost in any borrower's mind and this will help to avoid time delays and other formalities the lender has to undergo to scrutinize the home loan application by any borrower. The customer also can understand his personal financial standing and consider only those loans which they can easily repay within their salary and expenses.
Home loans are and will be the most cheapest loans available among any other loans, and any move to smoothen the application and approval process is considered as positive and leading toward better financial lending and borrowing dealings. This will save many administrative costs and precious time of both the customer as well as the loan lending institutions.

14 April 2011

Meaning and Benefits of LAP

Home loans and discussions regarding them one often hears the word LAP. This term means loan against property. What does loan against property mean? It simply means that one can avail the facility of taking a loan against any self occupied property or rented property that is owned by the borrower.
This is also termed as mortgage loan and the borrower can get a certain percentage of money considering the total value of their property. The bank or financial loan lending institution would do appraisal of the property for coming up with the total market value of your property or house. Then accordingly you can get 40 to 60% amount of this value.  This is considered as a secured loan as the borrower provides a guarantee of repaying the loan by using his property as security. Let us now discuss the benefits of these types of loans:
1) This type of loan has low interest rate charged on the money offered by the lender. The interest rates offered for these loans are mostly 14 to 16%.  Since the borrower has provided security the lender is already assured of the repaying capacity of the lender and in case of default they can always fall back and recover the amount by selling the same.
2) The loan tenure is much larger than compared to other loans.  Usually these loans have tenure for a maximum 15 years. Due to this the EMIs are also small. Of course the EMI will always depend upon the value of your property and the total loan amount you have borrowed, your income, savings and repayment track record.  This is very good for loans taken on a longer period basis.
3) The best reason for going in for LAP is that you get a loan on an idle asset. Your house is a liability when you are staying in it, i.e. you do not earn from this and hence taking a LAP converts this into an asset where you can pledge this property and get a loan for any use.
4) Usually the loan processing time is also faster as compared to home loans.  Since the lender is already assured of your financial repayment capacity.
5) Unlike other loans LAP can be prepaid without any penalty charges or fees.  This has an advantage to the borrower as they can opt out anytime they have the funds available for repaying.
6) Even in case of failure to repay the loan amount you still have ownership to your flat and after selling it you can get the remaining amount for personal purposes.
These types of loans can be taken for purchasing a house, expanding business, marriage of children and also for their further education.  LAP are the cheapest available loans after home loans and one can also go in for refinancing the loan as the value of the property increases.

06 April 2011

A Mixture of Auto, Car Loans and Credit Cards Best for Home Loans

This is the best combination for any borrower to apply for a home loan. What does mixture mean and why is this required?
Every individual has a certain amount of financial standing. This is indicated by their income, bank statements and their assets. Any lender will first see how much the borrower is qualified, their age group and of course their salary and other investments. The credit card usage will show all the financial dealings the individual does and credit report indicates the spending habits of the borrower. After viewing all the loans taken by the borrower and their timely repayment will make your position clear. Here the lender understands that you may have taken a car loan, personal loan or any other loan. Your repayment schedule will be observed and if you are still repaying the same or have repaid it will affect your new home loan application to be approved. How do your credit card usage and spending habits relate to home loan? Any lender will consider your spending habits and credit card usage. If you have remaining payments and balance savings is less then this is considered as a minus point for you. If your credit card payments are on time and you also have balance then it indicates that your spending habits are calculative and you have savings remaining from your monthly salary in the bank which can be used as EMI to repay the new loan.
Why does a mixture of all these be the best combination for loan approval?  A healthy mixture is required. First it will show that you have repaid the loan on time. But too many loans will also create doubt if you are over doing your salary and taking another loan. You can only repay according to your salary and other investments that give monthly returns. If the figure is unrealistic your loan will not be approved.  Credit cards are another option indicating your repayment capacity and that you are managing your expenses within your means. A healthy mixture of car and credit card loans will indicate your financial loan repayment capacity. Too many credit card loans though available easily are not good as they are available at higher rates of interest. 
Hence any lender will consider all these aspects and understand your financial behaviour. This will show your understanding and planning of finances. How you balance outgoings according to the incomings and how your payments are clear without and dues and defaults will definitely give thumbs up sign for your home loan approval.

05 April 2011

Is it Worth To Shift Your Home Loan?

Home loans are available at a certain rate of interest. Borrowers have many options to choose from as many government as well as priavate and nationalised banks offer money as loans. Taking a home loan is one thing and repaying it is another. With so many fluctuations in the market and financial ups and downs one is at a question to assess the home loans from time to time. If the EMIs start getting bigger than expected it is obvious that the lender has increased interest rate on terms of fluctuation interest rate clause. Is it then that one is stuck up with the existing home loan?
There is always an option termed as loan shifting.  As the term suggests the borrower can shift the existing loan at any given time for better prospects and interest rates. When the borrower goes in for a home loan he selects the best loan available from many options available according to his financial loan repayment capacity and financial posisiton. If there is unreasonable increase in the  EMI and the client finds another loan lender company that will offer the same amount on lower interest and attractive package then the borrowwer can think of loan shifting. This will come at a price and the first lending institution will charge a penalty fees which may amount to say from 0.5% till 1%. Also consider that all these processing and administrative work will take some time. So apply for loan shifting before beginning on the new home loan. Other wise you may end up in a mess as existing EMIs will be cut regularly and a fresh loan will add up to your worries in terms of interest. It is always understood that new lending institution will be in hurry to offer loan and the first lender will be reluctant to let go of the borrower and customer.
Some times if you are lucky you can also quoite the amount available at the lower interest rate from the new lender to the previous lender and in some cases they do adjust the EMIs in fear of losing a customer, or precious finance. This will help you to avoid all the administrative hassles and also get you to repay the remaining loan at a new and lower interest rate.
The important questions for any borrower before shifting your home loan are as follows:
1) Has your EMI increased at an unreasonable rate?
2) Do you know of better options and loan amount available at lower interest rate?
3) How much fees or penalty will the lender charge for closing off the home loan?
4) How much will you pay as administartive charges to the new lender for getting a loan?
5) Will you get the remaining amount as new loan at your existing financial position?
6) How much time and effort is required from your part? and can you afford it?
7) Is there a possibility to consult with your existing lender and come up with negotiations?
8) How much money will you save in total? is it worth the effort you will put up for loan shifting?
9) Finally how will the new lender progress over the years? you can consult friends and relatives to find out about this aspect.
Consider all aspects regarding loan shifting before  the final step other wise you may end up paying the same amount as EMI as you were previously paying , but just after a few more months!