All of us have a dream to purchase our own house. We often fall for expensive things, even if it is a lavish apartment or anything. Sometimes, our monthly income does not allow us to purchase such things with one shot payment. This is when we have to look for a suitable loan.
There are certain tools available in the market like the EMI calculator or check eligibility for a loan, but still it is recommended to trust only verified information when it comes to select a loan.
If you are someone who’s going to apply for a loan for the first time in life, then here a few common things you need to consider before selecting one.
Are you eligible for a loan?
Most of the people while looking for installment loans think that their eligibility to get a loan depends only on their income, but that’s wrong! Your eligibility to get a loan depends on a lot of other things as well.
The financial institution that’s providing the loan would like to know about your occupation, bank statement, if you are an employee then where do you actually work? Any other financial obligation, your history with the banks.
Basically, your complete credit profile is checked or evaluated. You know your financial stability, so you also know your bank history and past record better than anyone else. Therefore, you can easily determine whether you can be eligible for a loan or not.
The only part that your income would play is that if your income is high, then you will be eligible for a higher loan amount. Make sure that you don’t have so many financial obligations or loans with other banks all at the same time. It will lower the loan amount you might get, it will also decrease your chances to get a loan from some banks.
How much loan do you really need?
First ask yourself, what amount of loan do you want? And what do you expect, will you be able to get that much amount? Here, I would suggest you to keep your expectation in control.
If you are not aware, let me tell you that most of the banks will offer upto eighty percent of the property’s value to the applicants. However, it also depends and can be changed after looking at your income.
Apart from that, a bank will happily sanction a loan of a particular amount that can be translated to an equated monthly installment of about forty to fifty percent of the applicant’s monthly income.
A point to remember here is that if you have an existing loan, then the EMI of that loan will be deducted from your monthly income to find out how much money will be left in your monthly income and then the loan amount will be determined.
Keep track of the loan’s tenure – Select it smartly!
The bank will always want you to take up a loan for a longer tenure and they will tell you that its better for you because you will have to pay low EMIs. But here is the thing, the longer the loan, the more interest amount you will have to pay.
Interest is much higher in the initial years of the tenure. Ultimately, you have to pay more money as compared to what you would have paid in shorter tenure loan.
Other important factors – Interest rate and charges
If you are applying for a loan from a bank with whom you have a good history and relationship, you can surely negotiate on interest rates and other charges. Here is a protip – a good credit profile will fetch you a lower rate of interest.
Banks are always looking to help their valuable, long-term and good profile customers. Therefore, never lose chance to get a comparatively low interest rate loan.
Conclusion
Finding a loan is not that tough, but selecting the ideal one takes quite a few hours to make a choice. Last but not the least, it is imperative to read and understand the terms and conditions related to your financial institution. Conduct proper research before you make a choice.
Interesting related article: “What is Interest Rate?“