Page 114 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 6: Investment Strategies-I

Notes
!
Caution The foremost thing to be kept in mind is that one should never finalize a lender on
the basis of interest rates. Most of us choose home loan lender on the basis of interest rates,
cheapest the best. But actually, there are various other things that should be kept in mind
when you decide of taking a home loan.
Check your loan eligibility with various banks
Various banks have their own methods ad standards for calculating eligibility. You should
do some shopping to check which bank is offering you higher loan eligibility. Adding up
your spouse income may also be a good option to increase your loan eligibility.
Type of interest rate: Fixed or Floating interest rate

A fixed interest rate means that you will have to pay same EMI over a period of time
(it may be fixed for entire tenure or it may be reset at fixed interval). Floating interest rates
may change at any given point of time, which may result increase or decrease in either
your EMI or your tenure.
Processing fees
This fee is charged by the bank for processing the loan and is not refundable. In case you
decide not to take the loan from the bank, then the entire amount you have paid towards
processing fees is lost. This generally varies in the range of 0.5 to 1% of the total loan
amount. Also payment of processing fees doesn’t means that your loan is passed. It may
happen that you pay the processing fees but still your loan is not sanctioned due to various
other reasons. Thus before paying the processing fees, you should bargain on the same
and get it confirmed from the bank in writing.
Prepayment fees
Prepayment fees come in to picture in case one wants to prepay his home loan from
various sources. It may be from his personal savings or if he is planning to switch the loan
to a different lender. Few of the banks offer no prepayment charges in case the prepayment
is done from own sources. But in case the person is shifting the loan to a different lender
then most of the banks ask to pay a fee in the range of 1% to 2% of the outstanding loan
amount.
All the charges should be always be taken down in written from the bank and the written
document should be preserved in case the bank asks the person to pay up some different
amount after sometime.
Once you are satisfied with the above clauses and the interest rate offered by the particular
lender, you should go ahead and buy your dream home.

Along with that it is always said that you can get the best home loan deal only after your
property is finalized. So before you start with your loan hunting, it is advisable to finalize
the property.
2. Personal Loan: Finance is provided to meet out all personal needs like renovating the
house, purchasing a computer, marriage or medical expenses etc.
Personal loans are loans provided without any security. Before you hurry to take
this magical loan pause a bit. Personal loans are tricky they are far more expensive than a
loan given against security. They also require that you have a good credit report and that
you can prove that you have a regular income of at least ` 3 lakhs per annum.

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