Know more on the benefits and risks of Home Loan
It may sound fascinating to own your dream house. But the decision of taking a home loan for that must be analyzed with respect to benefits and risks involved. The benefits can be listed as getting a good interest rate, good banks services, balance transfer facility and option of making prepayment. The risks can be enumerated as bad credit, no preparation or insufficient knowledge.
Pros – flexible interest rates and sufficient savings
It is not possible to buy dream home all from your savings. For this purpose, home loans are the best. Banks provide easy and convenient ways of acquiring home loans. You get various options – monthly EMIs, flexible interest rates and home loan plans. You are in fact saving a part of your income towards home loan. You are also allowed to choose the tenure of your loan for making repayments.
You do considerable amount of savings such as no rent payments. The appreciation of your property takes place from the date of its purchase itself. Your repairs and renovation costs of your owned house do not go in waste.
Pros – bank services, balance transfer facility and prepayment options
You are also provided with numerous services by banks in relation to home loan application. Banks provide doorstep services for collection of documents as required. You can concentrate on your work and documentation part.
If you are not satisfied with the bank rates or services, you can switch to other bank by making a balance transfer of your home loan. This is not the case with other borrowing options. If you want to prepay your loan before its completion date, then you go ahead with it. You need not wait till the last date of loan tenure.
Cons – no preparation, bad credit and no knowledge of home loans
It is alright if you are new to the home loan concept. But it is stupid to be ignorant about home loans while making an actual home loan application. You must be well prepared with your documentation. Any error or misstatement found in your documents can prove risky for the approval of your home loan application.
If you are already burdened with credit card payments and loan EMIs, then it is too risky to apply for a home loan. The home loan EMIs comprises substantial part of the income. If you are spending three-fourth of your salary in paying dues, then how will you manage your expenses for survival?
You must be aware about the different types of home loans and its interest rates. For that, you can simply visit the sales office of the bank to enhance your knowledge.
Cons – property issues and additional expenditure
You must never take a home loan for a property riddled with problems. In order to avoid such problems, examine your property with respect to structure, plumbing, roof, electrical lines, and the repairs to be done. Do not take a risk in this.
Do not focus only on the property cost. Additional costs must also be considered such as stamp duty, insurance, legal fees, inspection fees, and utility bills.
Thus, before applying a home loan, understand its elements and take a decision accordingly. You must also consider your position for the same.
Recommended Read :
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- Things to Know Before Balance Transfer of Home Loan