Factors Affecting A Home Loan
Home loans can be availed without shredding sweat flexibly in numbered days from financiers. But to avail of a home loan, certain factors need to be considered and pondered over before standing before a bank.
Factors Affecting The Eligibility Criteria Of Home Loans
1) Age: Age is a significant factor in the eligibility criteria though anyone between the age of 18 and 75 can avail a loan in most banks and NBFCs, the applicant’s who are at the beginning of their career or an official who is about to retire soon have high eligibility rates as they can pay the amount soon without much hassle.
2) Income: The applicant requires a stable income or profit to become a home loan borrower. Salaried and self-employed individuals are preferred mainly by the banks and NBFCs to avail the loan. Adding an extra member of your family as a co-applicant can enhance your eligibility, as two members are better than one in paying off the debt. The minimum stable money required in their bank account to avail the loan is Rs.25,00 in most banks and NBFCs.
3) Credit score: The CIBIL score or the applicant’s credit score weighs a lot in determining eligibility. A good credit score is one above 750 and has a high chance of getting the loan. In addition, the score takes into consideration your previous loan history, and how you’ve paid your monthly payments and the kinds of loan or debt you’ve borrowed in the past. This helps the lender in assessing your repayment capability.
4) LTV and property details: Loan to Value ratio is the principal amount a bank or NBFC grants for the asset, here the home. Depending on the property’s value, bankers evaluate the money they can sanction as the loan amount. So if the property’s value is high, there is an elevated chance of getting more amount. If the loan is for buying a new house and not a loan against a house, the lenders consider your down payment capacity, and if the applicant can pay 20% or more, the chances of availing of the loan soon are high.
5) Existing debts: if the applicant has loans or debts in his/her name already and has to pay high monthly interest, the bankers hesitate in sanctioning, but if the profit or income is more than enough to cover all your loans, they approve it fast. Therefore the repayment capability of the applicant plays a major role in the approval process.
Factors Influencing The Interest Rate On A Home Loan
The applicant needs to consider the home loan interest rate a huge factor before availing of a loan.
1) Interest type: There are two types majorly in how the applicant can pay a monthly instalment. They are floating and fixed interest rates. Floating interest rate changes each month according to the financial markets, low or high, the applicant doesn’t know. Budget planning is difficult and involves high risk but paying a low interest rate compared to a fixed interest rate each month is possible. In fixed interest rates, the monthly instalment amount is fixed by the NBFC or bank, and it doesn’t vary over time. Therefore, budget planning is possible and involves low risk. A Home Loan EMI calculator on the bank’s official website or NBFC can be used to calculate the interest amount.
2) Loan term: The tenure or loan term is the period of the amount the applicant avails the loan for. It may vary from 5years - 25 years, depending on the bank and NBFC. If the tenure is long, the monthly instalment amount the applicant has to pay each month is low and vice-versa.
3) MCLR rates: Marginal Cost Of Funds Based Lending Rate is the minimum interest rate a bank can lend the loan amount at. According to the tenure, the bank or NBFC fixes a date for the applicant, and the interest rate for that year may vary depending on it. Therefore the MCLR can increase or decrease your interest rate each year and weighs a ton in affecting the monthly instalment amount.
Also read this: Home loan available offline or online?
