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Tricky terms of banking industry

No-one wants to enter a financial industry until they need funds and actually want to save themselves with harmful after effects of bearing any kind of losses. So before you have to enter you do not think to enter the territory of the financial world without knowing the in and outs of the terms and its industry. It needs a lot of preparation but did you researched before applying for your home loan. However, your home loan application got approved in no time. It has been two years now since you bought your home, but without using your mind fullness. After some time of repaying your loan you realise that there were certain loopholes in your study. If you have been little bit more careful, things would be been different.

Due to their awareness and nervousness home buyers may go wrong at several levels of the process while applying for a home loan and a slip is more likely to happen at places where you least expect it.

Let’s start with the loan tenure. The bank can give you an option to choose between a 20-year and a 30-year loan term. Before choosing think logically and the logic is simple. The shorter the loan tenor, higher the monthly EMI (equated monthly installment) payment where as in the longer tenor you have to bear smaller EMI’s. So anyone would opt for the 30-year tenure. As an unaware borrower you might have considered a 30 years tenor to be a very long period. But your priorities are going to change in the mean time. At a certain age, owning a home seems to be an urgent need and after three decades financing your children’s higher studies and weddings would be your key concern. So, do you want to keep yourself engaged to a long term obligation? In case your present financial situation allow then opting for a shorter tenor will be a wise decision. It will give you financial and emotional freedom in early years.

A wise Word: A home loan is a personal commitment. Think twice and take a long hard look at your present and future financial aspects before you sign on the dotted line/ agreement.

Another very common and complicated term used is the rate of interest. As a first time borrower you may not be well-versed with the highly complicated movements of the market, you may opt for a fixed rate of interest on your home loan. You will be satisfied even if you have paid more than others who opt for a floating rate and use their knowledgeable skills to understand the market movements, you will be sure of the fixed amount to be paid to the Bank/ NBFC every month. to be regular on the repayment track should be your first and foremost priority. After joining the loan agreement, do you have any idea that your lender might have put a clause in the loan agreement which states that they reserve the right to revise the interest rate after a certain period of the loan tenor even after applying for a home loan on a fixed rate of interest. This single statement fails the whole purpose of opting for a fixed rate.

A wise Word: Isn’t it a better idea to learn the tricks of the market movements? You will definitely learn something new and you can save money, too. In fact, you can find alternative ways to start making money after a point by investing in stocks and other beneficial bonds.

Now, we come to another financial term that is highly confusing and can be tricky too. There can be a situation when your lender says that you are not eligible for the applied loan amount but if you have your spouse, a friend or a relative as a co-borrower in your home loan application, the Bank/ NBFC can sanction the loan amount which you have asked for. You can convince your working wife to become a co-borrower in the home loan process and she gives her approval on one condition that she will not be making any financial contributions. The deal will be limited to work only on papers. This might seem to be feasible to you at that particular moment.

Now, let’s assume for a miserable moment when something unfortunate happens in the future. In this scenario, your Bank/ NBFC will hold your wife, friend or your relative responsible for making the regular EMI payments. You should not expose yourself to certain expected risks of future to meet your short-term goals.

A wise Word: it is important to keep in mind that becoming a co-borrower in the loan does not make you the co-owner of the property. Becoming a co-borrower also restricts your possibilities to apply for another loan in future.



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