5 factors to consider while choosing your home loan lender.

Loans are a big business for a bank, but not such a happy thing for an end consumer. But it is the most dependable form of funding source while buying a house in today's world. In an effort to meet our financing requirements, it is important to understand that we should not rush into finalizing our home loan lender as this relationship with your bank might last for more than a decade. To ensure that you have a good track record of repayment, it is imperative to know the terms and conditions under which you will be taking a loan.

When you apply for a loan, the builders and loan agents will try to hurry up things. It is but obvious they do it, as it is a source of income for them. But do not yield to these pressures. Do your own homework, read every bit of info available on home loan lenders. Go shopping for a loan that provides favourable terms and conditions.

Do not fall into a trap like Ragini Kadam did. She just chose a lender in hurry and realized that she had to bear the brunt of a host of hidden charges. We have put together her experience to highlight the importance of knowing your loan and lender well before you sign on the dotted line.

She is a Bangalore-based techie who just chose the bank with a very smart salesman while taking a home loan. She did not go hunting for a home loan and did not realise a whole host of hidden charges and higher interest rate, which she had to bear while being granted a loan.

"When I took this loan, I was given a sanction letter in 15 days from a private bank. If I had waited a little longer and opted for a public sector bank I would have saved a lot in terms of foreclosure charges and interest rates. But I was in a tearing hurry. The excitement to buy the house quickly and the persuasive salesman made me chose this bank," opines Kadam.

To help you understand the process of borrowing, we list the following important factors to consider:

Choose a well-known Lender: Every bank or housing finance corporation (HFC) has its own method of screening process when it comes to granting a home loan. While some of them process it quickly, the others take their own time. Just because a few lenders take some time to process your loan application does not mean that the home loan comes to you with a raw deal. In many cases, such banks provide exceptional services to the customers. So it is very important to opt for a reliable lender.

Loan approval process: Some banks take a couple of weeks to process your loan application while others may take up to a couple of months. You should understand that private sector banks like HDFC, Kotak, Axis Bank, ICICI Bank, and MNCs like Standard Chartered Bank, HSBC and others do it faster than public sector banks. While the public sector bank may have lesser processing fee, they may take up to three months for disbursal in some cases. Many of customers also prefer a bank with good internet banking facilities. So, every bank has its own pros and cons. You need to choose the one that suits your requirements.

Eligibility: Your eligibility is decided after you submit your duly filled loan application form along with documents required to process the loan. Lenders will need your bank statement reflecting the transactions for the last six months, income proof in the form salary slip and form 16 for the last three years, copy of you PAN card, age proof and address proof.  After you submit the documents, the bank will do due diligence process by pulling out your Cibil credit score to check your credit history.

Loan repayment: We strongly advice you to read the entire loan document to understand the terms and conditions well before you take on the loan. Please read the settlement and foreclosure clauses in detail, because these are the areas where many of the customers end up feeling that they are being overcharged.

Borrowing costs: Taking a home loan means incurring a few expenses to get the loan. It includes the following:

1. Processing fees
2. Service tax
3. Franking charges that are applicable for registering the loan document
4. Interest as applicable. It could be fixed or floating. We strongly advice you to calculate your costs in actual terms and not fall for percentage games
5. Prepayment and foreclosure charges: Please note that Reserve Bank of India has banned these charges on home loan. So if there is any bank charging them, you need to talk to your bank about it.

Weigh in all these options before you choose your lender, as mentioned before, it is going to be a long-term relationship that you will be having with your lender. If you do this much of back grounding before you sign on the dotted line, your loan repayment years will be a peaceful course.

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