What Is A Home Loan?
In India, owning your own house is considered as a sign of success and prosperity. As the average income ratio of Indians is increasing, the desire to buy own house increasing simultaneously. Even though the price of property is increasing day by day, irrespective of urban and rural areas, people are interested in buying their ‘own’ house. But it’s highly impossible for a common man to buy a house only with his or her savings. That’s why the popularity of home loans has touched the sky. Home loans are the highest selling banking product. They come with various benefits and features for various house related needs.
A home loan which is also known as housing loan refers to an amount borrowed by consumer/s from a bank or NBFC to buy, construct, repair or renovate a residential property. This borrowed amount or loan is lent on a fixed or flexible tenure and an interest rate on the borrowed amount. The borrower/s are supposed to pay off the principal amount of loan with the interest in the given tenure.
But as it’s a huge financial investment, people often get scared before opting for a home loan because there are some baseless myths. At Ruloans, we are pledged to give solutions to all your financial needs. So here we are busting some famous home loan myths…
MYTH 1: You don’t get tax benefits on home loan
Home loan is the only type of loan which offers you multiple tax benefits. You can get benefits under Section 24, Section 80C and Section 80EE under Income Tax Act. By availing these tax benefits you can loosen the financial burden on yourself.
MYTH 2: Strong CIBIL score is a promise to get a home loan
Even if you have a strong CIBIL score, bank and NBFC can reject your home loan application on the basis of documentation, eligibility, assurance of payment etc. That’s why having a strong CIBIL score is not enough to get a home loan from any bank or NBFC.
MYTH 3: The cost of EMI increases with increase in EMI
If you have opted for floating interest rate and the interest rate changes, your EMI does not fluctuate much. Banks normally extend the tenure of your loan with the fluctuation of interest rate.
MYTH 4: If you transfer your home loan, you have pay from the beginning
Home loan transfer means you transfer your home loan from one bank to another to avail better interest rates. By doing so, you have to pay the loan amount to the new bank or NBFC you have transferred your loan to. After the transfer, you are supposed to pay the remaining amount on the home loan. You are not supposed to pay the whole original loan amount. The share of loan which you have paid earlier remains paid.
MYTH 5: Interest rate remains the same throughout loan tenure
Banks offer two types of interest rates when it comes to loan: fixed interest rate and floating interest rate. In home loan, repayment starts with fixed interest rate and after a specific period (mostly 3 years) bank shifts home loan to floating interest rate from fixed interest rate. So the type of interest rate changes so does the payback amount.
MYTH 6: Banks do not negotiate their fees
Banks charge a minimal amount as processing or administrative fees. This fee includes all legal and technical costs. If you think that you can’t bargain this cost because it’s a bank, then you are sadly mistaken! You can use your bargain skills and guess what, banks do budge. They negotiate these fees and you end up paying lower amount than earlier asked for.