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Personal Finance Home Loans

Personal Finance  Home Loans

Housing is a priority sector (banks are required to lend a prescribed percentage of their total advances to this sector) declared by RBI. In view of stiff competition among banks and financial institutions for personal advances and because housing loans are secure and safe advances with comparatively higher loan amount than other categories of personal advances, all banks and financial institutions show their keenness for home or housing loans. An individual looking for finance for acquiring a home / flat/ apartment should compare the offers carefully before finalizing the bank / financial institution for availing the finance. Some important aspect to be compared are:

  • Interest Rate : The interest rate to be charged by the Bank / financial institution.
  • Whether the interest will be applied on daily reducing balance basis or on maximum outstanding during the month. The interest application on daily reducing balance basis results in reduction in interest cost as the interest gets reduced from the date of credit of instalment in the account.
  • Prepayment / Advance Payment Penalty : All banks usually charge penalty for prepayment of loan. However, the amount of penalty charged by different banks / financial institutions is different. You should look into this area carefully as you may, in future, desire to pre-pay or switch the loan to some other bank / financial institution for the reason of lower interest rates or any other reason. Banks also charge penalties for late payment of installments, return of instalment cheque etc. The incidence and amount of penalties may be looked into.
  • Some banks offer home loan accounts as overdraft accounts. In these accounts you have monthly reducing drawing power. These type of accounts result in lower interest burden as you are able to park your surplus funds in your account and reduce the interest cost/burden.
  • Processing / Application Handling Charges : These charges are also different for different banks / financial institutions.

Personal Finance Home Loans

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