Blog #ICICI Home Loan

How To Apply For A Home Loan?

The whole process of applying for a home loan is not so complex. Following are the steps which will tell you about the procedure of applying for a home loan:- 

1) Application:- The very first step for applying for a home loan is filling the application form. The form would contain a few details like your name, phone number, pin code, type of employment, etc. After filling the form, the representative will get in touch with you to move forward with the process of application. ICICI Home Loan offers attractive interest rates to its customers.

2) Collection of Documents:- Some of the documents that you need to apply for a home loan are:- 

a) Identity Proof- Aadhaar Card, PAN, Voter ID, Passport, Driving License, etc.

b) Residence Proof- Utility bills, ration card, PAN, Aadhar Card or renter’s agreement can be submitted. 

c) Bank account statements.

d) Latest salary slips.

3) Document Processing and Verification:- After taking your documents, the moneylender will process and authenticate all your documents carefully. They may even contact the relevant organisation or your office to confirm your occupation or employment. In this step of document processing and verification, they will also conduct a credit enquiry to check your credit report and your CIBIL score. Only if your credit report, documents and CIBIL score all are satisfactory, then the application for your loan will move further. You also need to fill the Home Loan Processing Fee.

4) Sanction Letter:- After the successful completion of all the steps mentioned above, the customer will receive a sanction letter. The following details are involved in the sanction letter:- 

a)  Amount of loan.

b) Rate of interest.

c) Type of interest rate, whether fixed or variable.

d) Tenure of repayment.

Apart from this, a sanction letter also contains other terms and conditions and policies of the home loan. The customer has to sign a copy of the sanction letter and revert to the lender. After all this, the offer of a loan will be accepted.

5) Secure fee payment:- This payment is a one-time secure fee, which you have to pay after you have signed the sanction letter. The moneylender can also ask you to pay this fee before signing the sanction letter.

6) The loan agreement and disbursal:- After the completion of all these steps, the final agreement of the loan will be given to you, after the checking and verification by the lender. Finally, the bank or the financial institution will disburse the amount of loan in your account, according to the terms and conditions.

Advantages Of A Home Loan

1) A home loan has a lower interest rate as compared to the other loans. 

2) A home loan is a really easy and simple way to get a large amount of money in a short period of time.

3) A home loan is a secured loan. It means that it is secured by your house value.

4) The home loan may be tax-deductible. It means that it is removed from the taxable income. It, therefore, lowers the expense liability of the tax.

5) The money is given to you in cash when you apply for a home loan.

6) A home loan is beneficial for the lenders too. This is because the lenders have a tangible asset that they can repossess. If the borrower who has borrowed the money for a home loan, fails to pay the debt, the moneylender can automatically take the whole possession of the house.

Disadvantages Of A Home Loan

1) You provide your home as collateral in a home loan. It is risky as you can lose your home to the lender, if you, unfortunately, fail to repay the debt.

2) In a home loan, there is a very high chance of facing bankruptcy. This is because the value of the home loan is worth more than the net worth of the house.

3) No doubt, a home loan is an easier way to get a large amount of money in a short span of time, but the borrower may sink deeper into debt if he takes up a second loan to pay the first one.

Also read this: How is a Land Loan different from a Home Loan? 

Home loans and personal loans serve entirely different purposes. An individual goes for a home loan when they want to have their own home and goes for a personal loan for meeting any expenditure.

• A home loan can be availed for many purposes such as Home Purchase Loan, Home Construction Loans, Home Improvement Loans, Home Extension Loans, Land-Purchase Loans/Plot Loans, NRI Home Loans.
• A personal loan can be availed for many purposes, such as repaying any existing debts, home repairs, meeting marriage expenses, purchasing any gadgets, meeting any other everyday expenditure.

Banks charge specific interest in both home loans and personal loans. In the case of home loans, banks charge EMI (Equated Monthly Installments), which are to be paid every month, while in the case of a personal loan, the interest is to be paid at fixed intervals.

One of the significant differences between a Home Loan and a personal loan is that a home loan is secured. A home loan is secured against the value of the property, while a personal loan is unsecured. This is the main reason why a personal loan is more expensive than a home loan. Because banks are operating without any collateral in personal loans, they charge a higher interest rate. The lowest interest rates, which are implicated in a home loan, can go to as low as 6.6%, while in the case of personal loans, the interest rates can be as high as 10%. The lenders often offer a lower amount of loan in case of personal loans as it is unsecured, so to get a house, the borrower has to go for a home loan.

One more advantage of a home loan in comparison with a personal loan is tax benefits. A person can claim tax benefits in the form of tax deductions under Section 80 C of the Income Tax while paying the EMI of a home loan. But no such tax deduction is available in personal loan.

The benefit of tenure is made available with a home loan and not with a personal loan. Home loans are generally long-term and may go to as long as 30 years, while personal loans are short terms. The repayment of home loans is a much easier task as the compensation is spread over a long period.

Moreover, it is believed that a home loan is a better way to enhance your credit score than a personal loan. With prompt and timely repayment, an individual can improve their credit score in a better way. But the benefit of such can be seen more in a home loan due to its long tenure and better opportunity to make regular payments over a more extended period to enhance the credit score.

One common feature that is similar between both home loans and personal loans is the ease of availability. With enhanced competition and clutter in the financial markets, banks and other financial institutions are gearing up to attract more and more customers and provide them with many benefits and create dominance in the market.

So many lenders are offering similar services, and the customer has to choose the best amongst them. This calls for an accurate customer analysis of what they have to choose as per their needs and capacity. For example, ICICI Home Loan is known for providing the best in class customer service in the market. There are much more available from which the choice has to be made.

The process of applying for a home loan as well as personal loans has been simplified. Now the customer does not have to stand in enormous queues and wait for their turn. They can avail of any banking services at their fingertips. All the benefits of the banks and other financial institutions, including home loans and personal loans, have been made available on the lender's respective websites, portals, and mobile applications.

Conclusion:

Home loans and personal loans both serve different purposes, and both are pretty essential. Home loans are relatively cheaper and safer than personal loans, while personal loans are easier to avail with less documentation.

Also read:- Gold Loan vs Personal Loan