Buying a property tops everybody’s life goals. Today, financial institution are our best friends when it comes to fulfilling the goals since the real estate prices are soaring so high that it is inevitable that one can buy a property without any financial assistance. This has also been made easy because of the ease of getting a loan from the banks.

But there are several factors that one needs to consider before applying for a loan:

1)      Loan eligibility – Once you are done zeroing in on the property that you are interested in buying, evaluate your financial standing. Look through your bank accounts and decide how much can you spare for monthly EMI and whether you hold enough balance for the loan to be cleared. Typically, banks allow a loan of 80% of the property cost. Also remember, you should not bite more than you can chew, meaning don’t sign up for EMIs higher than what you can afford, you should ideally go in for an EMI that is 50% or less than your monthly salary for you to lead a carefree life.

2)      Choose the lender – You can apply for a property loan to multiple banks and need not stick to only the one that you hold an account in. This helps in giving competitive interest rates and lets you take a pick depending on the terms and conditions involved. Look for other important aspects like customer service, penalties in case of premature termination of the loan and others.

You could also go in for a smart loan –prepaying a chunk of the loan to reduce interest or alternatively increasing the EMI to shorten the loan duration.

3)      Credit score matters – It is always advisable to check with CIBIL (Credit Information Bureau (India) Limited) to ascertain your credit score which is simply a score to determine your chances of getting credit from a financial institution. For this purpose, you need to furnish past details of bank statements, loan details, and credit card payments. Together the CIBIL score, net salary and EMIs paid towards existing loans determine your repayment capacity. Better the CIBIL score, better are your chances of getting mortgage loan approved.

4)      Interest rate – Decide whether you wish to go in for fixed rate interest rate or a floating one. While the former means that the EMI remains the same throughout the tenure, the latter implies that the EMI can be adjusted with a change in interest rate.

5)      Loan tenure – Loan tenure is inversely related to the loan tenure. The longer the loan tenure, the lower is the EMI and vice versa. There are financial incumbencies in both the case; the former provides ease of payment over a period of time while the latter implies lesser final amount to be paid.

6)      The finer details – Simply signing the loan agreement with the bank won’t do, you need to be aware of the terms and conditions and other fine print details. Always confirm the additional costs like service, administrative, and processing fees with the bank as these form an important component of the loan amount.

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