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Plan your Housing Loan EMIs in Advance for the Future

The Indian real estate market has undergone a tectonic shift in both property buyer demographics and their buying patterns. An early 2019 survey revealed that a minimum of 37% of its participants who determined to purchase houses were within 35 – 45 years of age. In the present day, individuals prefer housing loans mostly due to affordable home loan EMI and other additional advantages.

       Around 22% of growth is expected in the Indian home loan market during 2021 – 2026.

       In 2020, salaried borrowers comprised a market share of close to 88%. 

How to plan your housing loan EMIs in advance?

When seeking to avail a home loan in the future, you must plan the finances and the EMIs in advance to avoid rejection or default.

1.      A healthy practice is to maintain a total EMI outflow below 40% of your monthly earnings. It helps you address other financial commitments effortlessly. 

2.      Stay informed about the repo rate, which is presently 4%. The RBI has instructed all financing organisations to link their loans to an external benchmark, repo rates being the most preferred one.

Housing Finance Companies or HFCs determine their home loan interest rates based on the repo rate changes. For MCLR-based housing loans, rates of interest are indirectly affected and hence, lag in passing on rate cut benefits to retail customers promptly. On the contrary, RLLR or Repo Linked Lending Rate connects repo rates more closely with housing loan interest rates.

If RBI slashes the repo rate, borrowers are likely to enjoy lower interest rates under the RLLR regime and vice versa. Information about the current rate shall help you compare and select the interests offered by lenders.

3.      Estimate the monthly instalments towards repayment using a home loan EMI calculator online. This free-to-use online tool instantly calculates the total payable interest, EMIs, and the cost of the loan instantly. With no manual calculation, you simply need to provide the basic details – loan amount, preferred tenure, and the rate of interest. An approximate idea of your upcoming monthly outflows also helps you determine an appropriate loan amount and tenure as per your repayment capability. There are various other benefits of calculating EMIs before taking a home loan. 

4.      Assess your monetary requirements and future plans thoroughly before availing a home loan. As a credit against mortgage is one of the biggest financial commitments, make sure that your home loan EMI doesn’t disrupt other financial commitments in the future. Also, your monthly income must be adequate to afford the EMIs effortlessly.

Apart from this, it is recommended to set aside a fund equivalent to 3-months EMIs for unpredicted urgencies. Below are a few requirements which may crop up:

a)      Besides the property value, real estate purchase involves many other costs, like registration charges, stamp duty, brokerage charges, shifting expenses, maintenance bills, home improvement, etc.

b)     Expenses often increase in certain months for events like birthdays, festivals, etc. During this increased outflow, you can utilise the fund kept aside for home loan EMI payments without defaulting. The outcomes of defaulting on loan EMIs are many, and it is best to be acquainted with them before starting to service your loan to ensure that you know the importance of making payments in time.

Consequences of loan default

Home loans come with pre-determined repayment tenures of up to 20 years, over which you need to pay off the credit as EMIs. These are fixed monthly instalments paid on a particular date every month. If you fail to make timely payments, it accrues penalty charges and interest amount, thereby, increasing the total cost of the loan. In case you default for consecutive months, the lender may initiate legal procedures as applicable.

Furthermore, defaults impact an individual’s credit scores and reports adversely. Credit or CIBIL score is a suggestive parameter which reflects a borrower’s creditworthiness and financial behaviour. Lenders consider referring to the score to determine a borrower’s risk profile. A higher score above 750 increases your chances of loan approval and vice versa.

So, try to maintain a healthy credit profile for the future by making timely home loan EMI payments. If you are planning to apply for a fresh credit, improve your financial behaviour in advance by paying off your existing debts in time, which would help build an impressive CIBIL score for housing loan over time, thus enabling convenient loan approval. 

Settle with the most reliable HFC in India

Approach trusted housing finance companies in India that bring customised loans to seek the best-priced property for borrowers. On fulfilling the eligibility parameters, you can avail funds up to Rs.3.5 crore at affordable interest rates and pay off via manageable home loan EMIs.

       HFCs comprise a whopping market presence of 41.9%.

       In 2019, 24.6% of the home loans availed ranged within Rs.50 lakh to Rs.75 lakh.

While online applications have eased home loan procedures, existing customers can go through more simplified processes with pre-approved offers and the likes.

Pre-approved offers are available on a host of financial products, including home loans, loans against property, and more. Such schemes ease the entire process of availing credit and save more time. You can instantly check your pre-approved offer by providing some essential personal details only.

Sanctioning loans and determining interest rates are a lending organisation’s prerogative. However, eligible borrowers can avail low interest rates by following some key practices as mentioned.

A shorter repayment tenure increases the EMIs but reduces the total payable interests significantly. An existing borrower can also reduce his/her home loan EMIs through a balance transfer facility. Go for a reputed and trusted housing finance company for such a feature-rich financing option for house purchase.

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