What is the main deal?
Irrespective of our age or job, we all dream of having a beautiful house that we can call our home however when we come out from a dream to a reality, we often fall into a pit called affordability. In this era of increasing prices, all our income and savings go to cater to our basic requirement and our dream is always at a stake. However, to fill up this gap we all get facility to avail money from an institute to build, furnish, or buy your dream house with help of home equity loans. These companies generally provide low rates, easy process, and quick disbursals when applying it. A home loan is termed for the money borrowed by an individual from either bank or any money lending company. A certain amount of interest is applied, which has to be paid every month or in a given time frame as per the EMI.
As a collateral asset, the property of home is taken into consideration by banks. Home equity loans states that If the individual isn’t able to pay back to the bank in the given period then he/she has to undergo various consequences where their property is taken as a security in the name of home loan and the owner of the house can’t do anything regarding this after all the lender holds all the rights to confiscate the property and these companies further even sell out the properties to recover home loan rates and any dues payable. Under this topic, many other types of home loans come which you should be aware of so you can apply for it accordingly. It includes options like a joint home loan, top-up home loans, home construction, land purchase loan, and also the facility of transferring the loan to someone else.
The 8 important questions you should ask yourself before taking a loan
– Are you going to buy a house first or arrange for a home loan? because it’s advisable to figure out your home loan condition before finalizing a house in eagerness. Always use a home loan calculator so you would have the proper estimate about the time frame and availability of money.
– Is your Job condition stable? Because during pandemic many people lost their jobs or are at the verge of losing it, so ensure that you are financially stable having a steady income before taking a home loan.
– Is there any default coming on the way? Because then your credit score can be impacted if your salary was cut, failing to pay the minimum amount or taking a low salary job leading to EMI default. A home loan calculator can help you out to determine when you will have to accommodate.
– Are you well prepared for any emergency? As this procedure involves a lot of uncertainties so you should be prepared with financial emergencies and in case of any death or disability always look for a term loan.
– Is your spouse working? If not then he/she must do after all women often get lower interest rates so it’s advisable to have them as a co-borrower or co-owner. This also provides you with a tax benefit!
– Are you planning to invest in property? Because even if rates are affordable there is a high risk to not find buyers for your property, ultimately leading to loss.
– Are you sure about the type of loan? because there are various types of loan which also involves flat rate and the flowing rate which can be switched. You should choose it wisely according to your needs.
– Have you informed and discussed the loan with your family?
Word of advice
While fulfilling the wish list always keep in mind that there’s a difference between a want and need. Many people end up getting trapped in this vicious cycle of loans where they and their generation either keep paying their entire income to the bank or their property is confiscated from them due to home equity loans regarding which they can do nothing as such. To play smartly you should keep such advice in your head so your life can sail smoothly. To run business many banks come out with new tactics and incentives and to be saved from the loop of debt you should follow some basic rules:
– Always look for home loan rates which you are capable to return.
– Make sure that personal loan EMI isn’t more than 10 percent of your monthly income.
– Don’t take the loan just because it is available, always follow your limits and keep analysing through home loan calculator.
– Ensure that your EMI doesn’t eat up all of your hard-earned money otherwise you will be left with negative net worth.
– The shorter the tenure better it is so your interest doesn’t shoot up.
– If a longer period of tenure is necessary then it’s advisable to increase the EMI amount with an increase in income.
– Discipline is the key, hence never miss out on your payments or delay them because it will show a poor impact on your credit profile making it difficult for you to apply for a loan ever again.
– It is common sense to never invest from your borrowed money because it can risk your loss from both the sides, trapping you with huge EMIs.
– Always take insurance cover with home or car loan.
– Keep updating yourself about the rules or any changes in the interest rates.
– Never skip on any terms and conditions given by the company.
Like loan against property, there are many other options available like loan against bank deposits, gold loans so you should take the one which will be suitable for you. While planning to take a loan for your children don’t put your life and retirement at stake because they will have plenty of options like scholarship but you won’t. And even if you plan to take a loan always inform your family, never keep them unaware of it and always discuss it with them. It doesn’t increase the burden on you and your family. It can help you figure out much better and effective solutions.