Home Loan Comparison Checklist

 

As a home loan is essentially to do with the purchase of a home, it’s normally quite big in amount compared to a personal loan. Even a minor difference in the offered rate and/or terms of a home loan can have a major impact on your financial burden, both in short and long term. Hence it becomes very important that you comprehensively compare and evaluate different home loan offers in India, on multiple criteria, before finally selecting one. Furthermore, as all the banking establishments and NBFCs engaged in home loans business offer different types of offers and discounts to attract more customers, comparison is the only way that you can find out the best one among them for your needs.

You must compare home loan offers on various important parameters including:

As home loan is a secured loan, the interest rate offered on it is comparatively lower than an unsecured loan like a personal loan.  Banks and NBFCs decide their home loan interest rates based on the MCLR (Marginal Cost of Lending Rate) plus a spread on it (depending upon their risk perception of the applicant). The rates are offered both in terms of floating interest rate and fixed interest rate, and they might be different based on the gender and age of the applicant.

First of all, please note, a pre-approved home loan from a bank or NBFC doesn’t guarantee disbursal of the loan amount. Normally it takes anywhere from 3 to 4 weeks for a home loan application to be approved and sanctioned. However, the quickness of this process depends entirely upon your ability to provide the pertinent documents.

The lender would also take into account whether you’re working with an employer having a good reputation in the market or not. Your credibility will automatically increase and the lender might offer you a good home loan deal if your employer is well-known and has an impressive turnover. Being a part of such an organization works as a major plus for the applicant, especially in case of home loans. Your employment stability will also be factored in as an important eligibility criteria. The lender might not process your home loan application unless you’re salaried and have been employed with the same company for at least the past 2 years, or in case of being a self-employed professional, have at least 5 years’ total earnings to show.

Credit score is a numerical figure that shows your creditworthiness. Any lending establishment would look at your credit history before approving your home loan application. Factors like your existing loan amount, credit you’ve availed so far and your repayment history will affect your credit score. This in turn will impact your home loan eligibility. Credit bureaus in India like CIBIL and Experian regularly collect information regarding your transactions from credit institutions and banking establishments, to arrive at your credit score. Majority of these credit bureaus rate credit score between 300 to 900 points. The higher you are on this scale, the better will be your chances of getting a good home loan deal.

This refers to the percentage of submitted home loan applications that are approved by the concerned bank or NBFC. The higher this percentage, the more will be the chances of your home application getting approved. Normally pre-approved home loans are sanctioned and disbursed much faster

The home loan application processing fee is a one-time non-refundable charge levied by the lending establishment at the time of processing the loan application. This is either a fixed amount pre-defined by the lender or a certain percentage, usually ranging from 0.25% to 1% of the applied-for home loan amount. Some banks and NBFCs might also offer zero processing fee offers from time to time as a part of their promotional campaigns.

Reserve Bank of India (RBI) had introduced MCLR (Marginal Cost of Lending Rate) in April, 2016 to do away with the complaints that banks and NBFCs took a long time to pass on the reduced RBI interest rate benefit to the loan borrowers. However, banks continue to not automatically revise their interest rates based on the rates changes made by the RBI. This parameter tells you whether the lending establishment automatically revises the home loan interest rate (based on RBI rate changes) or not.