Secured and Unsecured Loans

Home loans are loans designed to help people purchase or improve real estate. Based on consumer’s needs and circumstances there are several options to home loans. Interest rates depend on the specific loan chosen and the credit rating of the borrower. Choosing the best home loan depends on what the borrower wants to do: purchase a new property, refinance an existing mortgage or make some home improvements.

Looking for a home loan begins after you have decided where you are going. Some banks offer finance for ready to move in properties, some banks for a property self constructed and others for properties under construction. Knowing your goal will shorten your financing options and save you time.

When it comes to your loan eligibility, lenders have different criteria to calculate it. Lenders generally want to take a look at your employment history so that they can see a pattern of stability and income and also want to take a look at your credit history, so that they can see a pattern of borrowing and repayment in your past.
In case that your income is an issue, you should shop around and see more banks to find out which one will give you the maximum amount. If you meet the lender’s criteria, this makes you more attractive to sellers because it shows you are serious.You are in the position to negotiate so try to get good interest rates.

An important thing to know and expect is that banks charge some processing fee to administrate your loan application. The amount charged is somewhere between 0.5% and 1% of the total loan amount. This fee is charged whether or not your application is approved, but it ensures it is processed.

You can choose between fixed and variable rate of interest. You must be aware that fixed rate does not mean the interest will be the same for the entire life of the loan, but only for a certain period. After this period, the lender may change the rate further.
In the case of variable rate, it would be wise to check whether the rates of your lender have gone down in the last year or so.

Getting a loan is a long-time commitment and a financial burden. Take your time to shop around and remember that your talents as a negotiator influence the cost of the loan. Lenders take into consideration first your income and personal profile. Apart from the APR, you should watch carefully for: processing fee, legal charges, prepayment charges, valuation fees and other hidden costs.

This entry was posted on Tuesday, August 24th, 2010 at 6:20 am and is filed under Home loans. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.