Getting a home loan is a lengthy procedure. However simple it might look in
the bank's advertisement, the fact remains that there are a lot of hiccups in
the entire process. Here are the 7 most common problems faced by home loan borrowers
in India. Each problem is discussed in detail and appropriate remedies are mentioned
along with it. The objective of this article is to ensure that your home loan
becomes a hassle-free experience.
1 Rejection at the first stage
Strange but true, many of the home loan applications do not pass even the first
test. They are out rightly rejected due to incompatibility between the borrower's
qualifications and lenders requirements. It could be the age criteria, income criteria,
proper documents not being submitted, the bank not being able to verify your
details properly, not passing the field investigations conducted by the bank
and many more. The best way to avoid being rejected in this way is to check
the eligibility requirements of lending banks carefully and apply only to that
bank which matches your profile. Keeping proper documents ready and providing
accurate, verifiable details to the banks will ensure that you sail through
the preliminary verification process.
2. Processing fee not refunded
With every application form for home loans, banks require about 0.25% to 1% of
the loan amount to be submitted as the processing fees. This processing
fees is generally NOT REFUNDABLE. In simple words this means that for whatever
reasons, if the bank finds that you don't deserve the home loan, this fees won't
be returned. This is the cost of applying for home loans. If in any case, the
bank you have applied to states that it will refund the processing fees in case
the bank doesn't sanction you the home loan, it is better to get any such declaration
in writing and make sure that the clause is enforceable. A verbal statement by bank
authorities won't be of any use unless it is properly and legally documented.
In all other cases there is little remedy for processing fees being not refunded.
3. Desired loan not sanctioned
The loan amount sanctioned is based mostly on repayment capacity of the borrower.
Many things come into picture, when the bank decides how much home loan a person
can get. The monthly income, financial history, other unpaid loans with the
borrower, past repayment record, credit card usage history if any, bounced checks,
average balance with the banks, continuity in present employment, total years
in employment, nature of employment etc. These factors all clubbed together
help the bank to decide whether it will be able to recover its money satisfactorily
or not. If you get rejected due to any such criteria, you can increase your
eligibility by clubbing together your spouse's, father's, son's, relative's
income and make them a co-borrower. In addition to it, if you have sufficient funds
in NSC's, provident funds, LIC policies etc. you can keep them as collateral
and ask the bank to finance your home loan.
4. The interest rate dilemma
Whether to go for a fixed rate or floating rate interest for home loans is
a dilemma which almost every home loan borrower faces. Even after deciding on
a particular loan regime, the home loan terms and condition fine prints can
create havoc with your interest rates. For example even if a borrower has opted for
fixed rate home loan and the bank has promised him a rate which he feels is
good, the catch is in the fine prints which authorizes the bank to
vary this fixed rate every 2 years, things can go worse for the fixed rate borrower.
Similarly if the bank doesn't pass you the benefit of lowered interest rates
in floating interest rate regime, it will be of a little value. Avoiding such
a situation essentially means that you study the terms and conditions of home
loan carefully and clearly ask the bank about such things. In case of floating
interest rates the facts can be verified by checking how the interest rates on
home loan dropped during low interest periods. Ask your bank for some historic floating rate changes.