Know Everything About Housing Loan and its Purpose
The financial instrument of loans forms one of the most vital features of any economy. It helps people purchase goods which they cannot afford to pay for in one go. For fulfilling their unachieved goals, people resort to borrowing money from lenders. The latter expects the borrower to repay the debt within a stipulated time. The lender also enjoys additional advantages. These benefits usually come in the form of interest rates. This whole procedure of borrowing money gets referred to as availing of a loan.
Loans are classified into several types. These can be grouped according to the security provided, purpose, and pledged assets among other factors. Housing loan fall within the ambit of loans based on the purpose it serves. It is the instrument that helps people extend wings to their aspiration of owning their dream home.
What is the purpose of a housing loan?
Home or housing loan is the money borrowed by an individual from any bank or a non-banking financial institution (NBFC) meant for purchasing a property. It comes with a predetermined interest rate. Until the borrower repays the amount in the form of EMIs, the lender retains the rights of the property. Thus, acting as collateral, the property safeguards the lender from facing any major loss.
Individuals apply for a housing loan to purchase land, renovate an existing place, buy a flat or pay for the construction of a house. You may opt for any kind of home loan based on your requirements, such as:
- Home Purchase Loan
- Construction Home Loan
- Land Purchase Loan
- Home Improvement Loan
- Home Repair Loan
- Home Extension Loan
Housing loans have witnessed a continued rise in popularity in India. As per a recent study, home lon applications have increased by about 25-40% across several Indian cities in the recent past.
Advantages of availing housing loans
Even if an individual possesses the means to purchase a house, a housing loan can serve other purposes. Housing loans in India offer customers numerous benefits. It is one of the cheapest borrowing tools, with its low-interest rate. Besides its affordability, some other advantages include:
- Tax deductions are permissible on home loans. Any eligible borrower can claim a tax deduction amounting to about Rs. 5 lakh.
- You can invest the money saved by availing tax deductions into some lucrative sphere.
- Long tenors allow enough time for loan payment processing trends.
How to apply for a home loan?
In case you’re wondering about how to apply for a home loan, it is quite simple. You can follow these steps to apply for a loan.
- Choose the bank or NBFC and ensure that you fulfil the eligibility criteria.
- Visit the lender’s nearest branch or log on to their website to apply for the loan.
- Submit or upload all the documents required for the housing loan.
- The institution will process the application and revert within a stipulated time frame.
Eligibility criteria for availing of a housing loan
Before filling the application form, borrowers must meet certain eligibility criteria. Some common requirements for availing of a home loan include:
- A decent credit score to showcase the credibility of the borrower to repay the loan. The bank analyses the repayment history reflected in the credit score and then grants approval.
- There should be the presence of a continuous income flow, whether one is salaried or self-employed.
- Generally, the age of the applicant should be between 23 and 62 years.
- Work experience of a minimum of 3 years.
The eligibility criteria vary according to the bank’s policies. Once you fulfil the eligibility criteria, you can use the home loan EMI calculator to make a rough estimate of the EMI amount to be paid over a sustained period.
Documents required for Housing Loan
While applying for the loan, applicants need to furnish some vital documents. Here’s a non-exhaustive list of the same.
- Address proof in the form of utility bills, passport, etc.
- Identity proof in the form of an Aadhaar Card, PAN Card, etc.
- Passport-size photographs
- Form 16 or latest salary slips
- Bank account statements for the last six months
- Evidence of business continuity
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A housing loan is a go-to solution for fulfilling one’s goal of owning a house. The interest rate accompanying home loans is typically the lowest among all types of credit facilities. The availability of tax deductions serves as an eye-catching incentive, and it attracts and inspires consumers to apply for a home loan. Furthermore, home loans in India come with zero part-prepayment or foreclosure charges. Thus, there’s no dearth of advantages linked with housing loans.
Bajaj Housing Finance Limited (BHFL) extends loans to individuals and corporate entities for purchase, reconstruction and renovation of homes and commercial spaces. The lowest interest rate on the home loan offered by BHFL is 6.75%*. The tenor is flexible and can go up to 240 months. With minimum documentation, you can apply for a housing loan from BHFL online.