What is a Home Loan?
A home loan is a type of loan that banks provide to purchase or construct a property by offering it as collateral. Applicants can use the home loan to buy a home and get a home constructed for them. Like all other loans, borrowers must pay back this loan as per the agreed terms with the bank. The borrower can claim a tax deduction on the total principal and interest paid to the bank in a financial year. Applicants can apply for the loan and submit the required documents. The applicant must submit identity proof, address proof, bank statement, salary slips, form 16, pan card, and photograph.
Post this, the bank checks the creditworthiness of the applicant, visits the property, checks the property documents, and then makes the loan offer. They can also contact the office to cross-check the employment situation. Post acceptance of the offer, the funds are transferred to the applicant’s bank account for construction at different stages of housework. It means that the amount will be transferred to the applicants at different stages of construction. If the loan is requested for purchasing the property, the fund is transferred to the seller of the property. The borrower would need to then make the monthly payments to the bank.
Monthly payments depend on the loan amount, tenure, and interest rate. The interest rate will also depend on the credit history, loan tenure, occupation, income, etc. The interest rates of home loans can be both fixed and floating. A home loan is a secured loan where a bank can seize the property in case of non-payment of loans. The processing of loans does take more time in comparison to other loans.
There is also the option of co-applicant in the home loan. The applicant has to give the original documents of the property to the bank for the loan to be sanctioned. Once the loan is paid off completely, the bank will return the documents to the applicant. Applicants can also pay off the loan before the expiry of the loan duration and prepay the entire amount with no charges.
Featured Image Credit: Times of India
