A business line of credit is the best option for you if you are looking for a flexible loan. Its function is the same as that of a credit card. Your business can borrow money from the line of credit whenever needed without paying interest on the entire line. The line of credit can also be used to cover all your payroll expenses and supplier fees. [B-01] There is a secured line of credit and an unsecured one as well. In the case of a secured line of credit, you have to give collateral to get your loan approved. These two types of lines of credit vary in interest rates, fees, and other requirements. However, both types require an annual renewal. You have to make sure that you have been in business for more than six months and have a good credit standing. Pros Of Business Line of Credit 1. Evens Out the Cash Flows A line of credit loan can help you even out your cash flows when your income is lower than your expenses. With the help of this credit line, you can pay your bills on time and avail the discount offered on timely payments. That will help you save a certain amount of money. Similarly, when your business is down during the busy season, you can use the money from this to increase your production, which will boost your income. 2. Only Pay for Your Needs If you opt for a regular loan, you will have to pay interest on the entire amount. This can be way above your business’s budget. However, in the case of a secured or unsecured line of credit, you have to pay interest only on the amount you have withdrawn. The balance of your line of credit will be the estimated total of all the expenses that you incur. 3. Better Opportunities With a line of credit, you have the chance to take advantage of opportunities like better marketing and advertising. They also open the doors to launching new products or opening an office in a new location. They also give you the ease of enjoying these things whenever you feel it is the right time. 4. Relationship With the Lender A line of credit requires a little bit of inquiry to know about your loan balance. This will lead you to contact the individual who helped you get the loan at the bank or other financial institution. If you build a good relationship with them, you can get a good referral when you want to take out another loan for any purpose. Cons Of Business Line of Credit 1. An Expensive Affair Even though you have to pay interest on the amount you borrow from your line of credit, it is still expensive. This is because they usually come with a high rate of interest. Sometimes the interest rate goes above 20%. Along with that, many credit lines come with hidden fees for initiation and processing. They also charge a significant amount for late repayments. 2. Application Process Is Time Consuming Applying for a business line of credit is much more burdensome than applying for a secured loan or a credit card. The documents required are: Your business bank statements Your bank statements Business tax returns Other business documents This is why it takes a lot of time to get your line of credit approved and sanctioned. 3. Leading to Temptations As good as a line of credit is for future opportunities, it is equally harmful because not every opportunity is good. If you take up business risks without evaluating them properly, you might end up using all your profit for the high-interest payments. Proper discipline is needed when you are taking out such a loan. 4. Low Limits A line of credit has a limit that is higher than a credit card but lower than that of a proper instalment loan. If the line’s limit is not enough for your business needs, taking up the line can be an entire waste of funds for you. The line will just add to your debt, leading to a downfall in your credit score and an increase in your debt-to-income ratio. [B-02] Is A Business Line of Credit Right for You? If you are looking for extra cash flow but do not have any specific purpose in mind, this is the right call for you. It will help you get through the seasonal ups and downs of businesses without any hassle. However, it is important to keep in mind that qualifying for a business line of credit is not as easy as it seems, especially for the unsecured ones. The lenders also tend to put a cap on the expenditure limit of your line of credit that you may not enjoy.
Getting preapproved for a home loan is considered to be very important in the process of buying a home. You can start off by consulting with a bank or lending institution and providing details about your home loan capital requirements. By getting a pre-approval letter from your bank, you will be able to discuss all the available loan options and budget your loan with your lender. This article discusses pre-approved home loan benefits and how to get a pre-approved home loan. [B-01] What Is a Pre-Approved Home Loan? A pre-approved home loan is a sanction provided by the lender. The bank will determine your eligibility for a home loan before granting this pre-approval. Unlike a typical home loan, a pre-approved home loan does not involve plenty of scrutiny along with legal and technical validation of the property. After verifying all of your information, the bank will assess your eligibility and license a loan with a particular interest rate. However, you will be required to submit all of your property documents along with your financial information. It is also important to remember that a pre-approved home loan does not translate to a guaranteed home loan. The lender would still have to approve your application before granting a home loan. Benefits of Pre-Approved Home Loans There are plenty of benefits that come along with pre-approved home loans. Here are 3 key benefits. 1. Negotiate With The Lender: As you gain an understanding of your eligibility and the interest rate offered directly from your lender, you would be in a better position to negotiate the interest rates and other terms. With a sanction letter in hand, negotiating becomes easier. 2. Easier And Faster Loan Process: Now that your loan application has already been verified and pre-approved, you can speed up the process of your home loan application. The only processes that have to be completed for disbursal include the income document certification and the legal procedures. 3. Better Financial Planning: When you get your home loan pre-approved, you gain a deep understanding of your financial eligibility, repayment requirements, and others. This insight can help you plan your finances better and stay on track with your loan repayment. Eligibility Criteria The eligibility criteria for a pre-approved home loan may vary depending on the bank you are availing the home loan from. However, there are certain common criteria that have to be met to be eligible for a pre-approved home loan. Age: To apply for a pre-approved home loan, you should be a minimum of 21 years and a maximum of 70 years of age. Credit Score: Your credit score is a crucial criteria to apply for pre-approved home loans. It should be at least 700 or above. Employment: People from a horizon of employment can apply for pre-approved home loans. Both salaried and non-salaried individuals who are existing or non-existing customers can apply. Things To Keep In Mind While Applying For a Pre-Approved Home Loan While getting a pre-approved home loan can be extremely beneficial, here are some things that you should keep in mind. 1. Associated Fees: It is important to consider the fees that are associated such as the pre-approved home loan processing fee and others. 2. Expiry Date: Your pre-approved home loan may expire over time. Usually, the time range for your pre-approved home loan can vary between 3 and 6 months. Make sure that you check the expiry date with your lender. 3. Credit Enquiry: You may be subject to credit enquiry once you apply for a pre-approved home loan. This is a process during which your lender will check your credit score and assess your creditworthiness. 4. Rejection of Application: It is important to understand that pre-approved home loans do not guarantee the disbursal of your home loan. Your application has to be verified by your lender after the pre-approval process for your home loan amount to be disbursed. 5. Interest Rate: While you apply for a pre-approval, make sure that you discuss the interest rate with your lender. In many cases, the interest rate of the home loan may be fixed during the time of pre-approval. [B-02] Final Thoughts Pre-approved home loans can help understand your eligibility and also plan your finances in advance. While getting your home loan pre-approved can fasten the home loan application process, it is not a guarantee of disbursal. If you are looking to apply for a home loan, Piramal Finance can offer you with home loans at competitive interest rates and plenty of benefits.
Owning a home in most cases is a once-in-a-lifetime investment and a collective dream of a family. There are several factors such as income, age, repayment capability, etc. which are considered by a lender while approving the home loan Many hands make light work holds true when it comes to a joint home loan. The involvement of multiple applicants as co-borrowers eases the repayment of loans and increases the chances of getting a higher loan amount. What is A Joint Home Loan? A joint home loan is a home loan taken with a co-borrower to share the financial burden and to get better home financing options. A co-borrower also known as a co-applicant is an immediate family member or a relative with whom the joint home loan is taken. All co-applicants can claim tax benefits under a joint home loan. Unless the co-applicant is a sibling or a relative, it is not mandatory for the co-applicant to be the co-owner of the property you wish to buy. However, all the members mentioned in property documents as co-owners have to be the co-applicant for a home loan. Who can Co-apply? Before we understand who can be a co-applicant when applying for a joint home loan. It is important to be able to differentiate between a co-owner and a co-applicant. A co-owner as established by the property documents is a joint owner of the property. On the other hand, a co-applicant can be any immediate family member who has a steady income flow. When applying for a joint home loan, it is mandatory to have a co-owner as a co-applicant while vice versa is not mandatory. Benefits Of A Joint Home Loan There are several benefits associated with a joint home loan. Some of the key benefits of a joint home loan are mentioned below. Higher loan amount The more the merrier holds true when it comes to a joint home loan. There are multiple earning members as co-applicants in case of a joint home loan. A lender considers the income of both the co-applicants while deciding the loan amount to be sanctioned. The more the income, the higher would be the amount of loan sanctioned by the lender. The higher loan amount gives you the opportunity to go for that dream home that you might not have been able to afford with a regular home loan. Ease of repayment One of the primary factors considered by a lender while approving the loan is the repayment capability of the borrower. In a joint home loan, there are multiple borrowers as co-applicants for the same loan. The EMIs repayment is shared among the co-applicants which reduces the burden on each member. This could also help in paying higher EMIs, reducing the loan tenure and the interest paid to the lender. Higher EMIs and shorter loan tenure increase your chances of becoming debt-free quicker. Tax relaxations A joint home loan allows the co-applicants to claim tax benefits separately. Under Section 80C and Section 24 of the Income Tax Act, a tax benefit up to INR 1.5 lakh on the principal amount and INR 2 Lakh on the interest amount can be claimed by the co-applicants. Please note that these relaxations can not exceed the interest amount paid to the lender. Special benefits for women There are home loan benefits for women if one of the co-applicant is a woman then she can avail an additional benefit of lower interest rates offered to women by lenders. [B-02] Bottom Line A joint home loan with your trusted family member as a co-applicant makes the process of acquiring your dream home more convenient and beneficial as compared to a normal home loan. The ease of repayment, higher loan amount, and sharing of financial burden are some of the benefits you reap when you opt for a joint home loan.
Planning to buy that dream home? A home loan is the next thought that comes to one’s mind, and the obvious big question is where to take the home loan from. It is crucial to choose the right type of lender according to one’s requirements. There are two options where one can borrow from: Banks – under Reserve Bank of India (RBI) regulations. Housing finance company (HFC) – specialized non-banking housing finance companies regulated by the National Housing Bank (NHB). Though both the bank and HFC home loans seem similar, they differ significantly due to different regulatory environments and fund sources. They both have their pros and cons. Thus, the borrower must make an informed choice based on these pros and cons and other vital factors such as interest rates, ease of borrowing, eligibility criteria, etc. [B-01] Home loan from Bank- Pros and Cons. The Advantages/Pros: Banks pass on the interest rate changes faster to borrowers as they follow the marginal cost of funds-based lending rate (MCLR) model of RBI. Banks have an overdraft facility that enables savings on the interest payments made by the borrowers. Banks prefer high credit scores and offer attractive interest rates on the loans. The Disadvantages/ Cons Banks follow a complex and stringent process of documentation. Loan Sanction takes a lot of time and is tedious. Loans are usually not available for people with low credit scores, i.e., below 750. The loan amount sanctioned does not include stamp duty and registration costs while approving the home loan on a property value. Home loan from Housing Finance Company (HFC) – Pros and Cons. The Advantages/Pros: While sanctioning a home loan, an HFC includes stamp duty and registration costs as part of the property’s market valuation – thus the borrower receives a higher loan amount. HFCs are comparatively less stringent about credit scores. Their higher interest rates make them flexible towards loan applicants having lower credit scores, even with a credit score of less than 750. HFC’s credit scoring model allows borrowers from the low income or informal segments, usually without any credit history, to take home loans. Documentation is hassle-free, and turnaround time is fast. The Disadvantages/ Cons Interest rates on home loans can be high. HFC’s may be slower in passing interest rate cuts to the borrowers as their lending rates are based against the benchmark prime lending rate (BPLR). HFCs do not offer an overdraft facility. A comparison between Bank Home Loan vs. HFC Home Loan CriteriaBank home loanHFC home loanRegulated byRBI-Reserve Bank Of IndiaNational Housing Bank (NHB)DocumentationStringentNational Housing Bank (NHB)Rate of InterestComparatively less than HFCComparatively higher than BanksFacility of OverdraftAvailableNot availableBenefits in interest ratesPassed faster as compared to HFCPassed slower as compared to banksLoans for lower-income group/ Informal segmentsNot availableAvailable [B-02] How to Make a Choice The borrower should carefully evaluate the actual loan requirements to make the right decision while selecting a lender, and also the following criteria are worth considering: Banks don’t include stamp duty and registration costs while sanctioning home loans on a property value, but HFC does. HFCs are flexible in approving home loan applications, offering variable loan periods, loans to the lower-income group, competitive interest rates and hassle-free documentation with fast loan disbursement. An HFC like Piramal Finance works well in doing this.
What is PMAY Pradhan Mantri Awas Yojana, PMAY for short, was introduced with the ambition of ensuring ‘housing for all’. With a focus on urban and semi-urban areas, the relevant scheme is termed PMAY-U (urban). The eligible target audience for PMAY-U is first time home buyers from the Economically Weaker Sections (EWS) or Lower / Middle Income Groups (LIG and MIG). With a similar concept and vision, PMAY-G (grameen) was introduced in rural areas. The main difference is that the eligible beneficiaries are to be chosen by local governing bodies based on predetermined criteria. The rules are stringent, and their enforcement strict to avoid any misuse or misappropriation of this scheme. Aadhar card entries are maintained in records for tracking purposes. However, even after feeling they are eligible, several people have reported getting their allotment applications rejected. Let us examine some of the most common reasons why this can happen. [B-01] Not Being Part of the Eligible Income Groups As mentioned earlier, the concept of PMAY’s ‘housing for all’ vision is focused towards people with lesser financial resources available to them and ensuring their standard of living is improved. For this purpose, certain categories have been defined, and people need to choose the right one depending on which category they fall under. Proofs are to be proffered for the purpose of verification of annual household income. If the wrong category is chosen, then the chances are high that your application will be rejected. Economically Weaker Sections (EWS) – Households with annual income less than Rs. 3 lakhs Low-Income Groups (LIG) – Households with annual income between Rs. 3 lakhs to Rs. 6 lakhs Middle Income Group-I (MIG-I) – Households with annual income between Rs. 6 lakhs to Rs. 12 lakhs Middle Income Group-II (MIG-II) – Households with annual income between Rs. 12 lakhs to Rs 18 lakhs Property Already Registered In Your or Spouse’s Name Another important condition, for availing the benefits of Pradhan Mantri Awas Yojana, as mentioned in the introduction section is the fact that PMAY is targeted towards first time home buyers. Hence, their motto – housing for all. If you are already a homeowner or have a home registered under your name or the name of your immediate family member, you will not be eligible to claim the benefits offered by the PMAY scheme. Providing false or incorrect information in this context is sure to get your application rejected.Do note that this condition also extends in the case of spousal eligibility. There is only a single subsidy benefit that can be availed for a married couple under PMAY. In other words, it means that if either you or your spouse has already availed this benefit, then you are no longer eligible to claim it again. If you do try, whether as an individual or as joint applicants, it is bound to get rejected. Availed Benefit of Some Other Scheme Pradhan Mantri Awas Yojana is not the only subsidy based housing scheme offered by the Honorable Government of India. There are other central and state level based schemes that share a similar mission and vision. In case you or your immediate family members have applied for or already availed support from any such scheme, your eligibility for PMAY shall get nullified, and you will no longer be eligible for the PMAYU or PMAYG benefits, as might be the case. Type of Property Being Considered It is worth noting that the PMAY scheme is applicable for the purchase/construction of new homes or (if applicable) to the expansion of an existing eligible property. If you are applying for properties that may be of other nature, like resale or distress sale, then the application may be denied by the lending institution. There is a certain amount of discretion involved here and will need to be thoroughly checked by your chosen lender. [B-02] In Summation As you must have noticed, PMAY is a very beneficial provision to enable and encourage first time home buyers. Due to low interest rates and credit-linked subsidy, you can own your home in an instant. However, you need to be careful and transparent in the information to be provided as part of your application. Consult trustworthy financial institutions to ensure you can avail the benefits of this advantageous scheme.
Many tax deductions can encourage more people to invest in houses. Here are the home loan tax benefits that you should know about. Tax benefit for interest paid on home loan A home loan is usually taken to purchase or construct a house. These home loans are repaid in the form of EMIs (Equated Monthly Installments) over a period of time. Every EMI has two components – the interest and the principal amount. A taxpayer can claim tax deductions on the total amount of interest paid in a single financial year. For a “self-occupied” property, the maximum limit for an income tax rebate is Rs. 2 lahks. Self-occupied properties are the ones where you live. However, there is no limit for properties bought on home loans and let out. Tax benefit for interest paid for property under construction This applies when the property you bought is under construction or has yet to begin. To be eligible for such tax deductions, the construction must be completed within 5 years of availing the loan. The Income Tax Act (ITA) allows people to gain tax benefits on such types of interest, known as “pre-construction interest.” The pre-construction interest is deducted yearly on top of the total interest paid. It is deducted in five equal Installments. It is eligible from when the property was acquired to when the construction was completed. Tax benefit on principal repayment Apart from the tax deduction on the interest paid, you can also claim tax benefits on the principal amount of the EMI paid in a year. This is mentioned in Section 80C of the Income Tax Act. The total tax rebate is capped at Rs. 1.5 lakh a year. This is mentioned in Section 80C of the Income Tax Act. The maximum rebate that you can receive is capped at Rs. 1.5 lakh. Here are the conditions under which you can avail tax deductions on the principal amount of your EMI: This benefit is only applicable after the construction period is over. Unlike the tax deduction on the interest paid, this is not allowed during construction. To be eligible for this, you must not sell the house within 5 years of buying it. If you sell it within 5 years of acquisition, the deductions will be added to your total income in the year of sale. Deduction for stamp duty and registration charges Stamp duty charges amount to a huge amount when buying a property. So does the registration charge. Under Section 80C of the Income Tax Act, you can also enjoy deductions on stamp duty and registration charges. It is eligible only for the year in which these amounts are paid. Extra tax benefits for first-time home buyers There are special housing loan tax benefits for first-time buyers. As per the provisions of Section 80EE, all first-time buyers are eligible for an additional tax deduction of up to Rs. 50,000. This is separate from the tax benefits on the interest and principal amount of the home loan EMIs. Therefore, this benefits people who want to buy their first home even more. Here are the conditions under which tax deductions on the first home loan interest can happen: The loan applicant should not own any other property at the time of loan application. The house for which the loan is being taken should be their first owned property. The worth of the property should not be over Rs. 50 lakhs. The loan amount granted should be Rs. 35 lakhs or less. Tax deductions for joint home loans If the home loan is taken jointly, each property's co-owners can claim a deduction for the interest paid and principal repayment. [B-02] Tax benefit on home loan for owning a second property If you take a home loan to own a second property, you are also eligible for tax deductions. The benefit depends on whether the property is considered self-occupied or lent-out. Under Section 24(b), tax benefit available on self-occupied property is capped at Rs. 2 lakh. There is no limit to lent-out properties.
Buying a home can be absolutely exciting. It is natural to lean towards a home loan to finance your home. However, it is recommended to find the best home loan available so that you can have the best experience. While considering the interest rate offered, the capital required, processing fee, and other charges, there are a few other aspects that you should consider. Here are some tips that you can use to have the best home loan experience. [B-01] Tips For The Best Home Loan Experience By following these home loan tips, you can have a seamless experience throughout the period of your home loan. 1. Check Your Credit Score: One of the most important aspects that a bank or lender will verify is your credit score. By analysing this score, they can gauge your creditworthiness. It is recommended to have a credit score of 750 or above. Having a high credit score can also fetch you other benefits such as a decreased rate of interest. If you would like to improve your credit score, you can do so by being timely with your credit bill payments, repaying a huge debt, etc. 2. Save For Your Down Payment: Depending on your bank or lending institution, the range of down payment may vary. Usually, it ranges between 2.25% and 20% of the price of the home you plan to purchase. While designing a monthly budget, make sure that you put away the required money for your down payment. 3. Keep Your Financial Documents In Place: During the home loan application process, you will be required to submit a list of documents. Make sure that you have these documents ready and in palace so that you can speed up the application process. Make sure that you have all the mandatory documents such as ID proof, address proof, bank statements, payslips, income tax returns, form-16, and others. 4. Compare Offers: Before you choose a home loan, make sure that you compare the available offers. A few banks may offer lesser interest rates along with other benefits. Compare these offers and pick a home loan that suits your needs the best. 5. Use a Home Loan Calculator: While making sure that the requirements for a home loan application process is ready, so is planning your repayment. Using a home loan calculator is considered to be one of the best home finance tips as it helps you plan your budget in a data-driven manner. 6. Understand Details About Your Interest Rates: The interest rate that is offered for your home loan plays an important role in determining the cost of your home loan. Discuss with your bank regarding your interest rate, be it a fixed or a floating interest rate. This can help you stay prepared and estimate your repayments. 7. Get Pre-Qualified: By having your home loan pre-qualified, you can speed up the entire application process and the verification process. To pre-qualify, you have to submit your financial information such as your income, savings, and investments along with your property documents. 8. Actively Respond To Your Lender: If you are contacted by your lender regarding any further requirements or requests, make sure that you respond quickly. This can help the lender keep your loan application active and move ahead with the process quickly. 9. Understand Different Loan Options: There are plenty of options available when it comes to buying home loans. For instance, you could either choose a fixed interest rate or a floating interest rate. Ensure that you check with your lender about all the available options. 10. Maintain Your Credit Habits Throughout The Process: In the middle of the home loan verification process, lenders may check your credit score. So, it is best to continue good financial habits even while your home loan is being processed. [B-02] In a Nutshell While opting for a home loan, it is important to understand all of its associated aspects. In addition, make sure that you plan your repayment schedule in advance so that you can financially prepare yourself. If you are looking to apply for a home loan, you can apply for one with Piramal Finance and experience several benefits including quick loan sanctions.
Most Indians resort to home loans as a means for owning their own home. These loans charge an interest rate over the principal and allow for long repayment terms. Home loan eligibility is one of the most common questions and concerns among prospective new home loan seekers. Lenders like banks and other non-banking financial companies (NBFC) take into account several factors before approving the loan and the amount. While certain aspects might vary from lender to lender, in general, the concepts and considerations are similar and typically include your credit history, past financial track record, current earnings and repayment capacity, among other aspects. It is important to understand these factors so as to get the best home loan possible. They are briefly described below. [B-01] Age Your age, especially your remaining earning age, is an important factor considered by lenders. The closer you get to the general age of retirement, the shorter the loan tenure tends to get, thus leading to higher EMI amounts. This is due to the perceived risk that your regular income stream is expected to end soon, and thus, your repayment capacity will be reduced. Hence, it is advisable not to delay getting home loans so as to reap the benefits of age and earning capacity. Salary / Earning Possibly the most important factor used to determine the borrowing limit for new home loans and consequential EMI amounts are your net monthly earnings. While different lenders may use different formulas and calculations, their main variable is your net monthly income. The focus is on net salary or take-home amount since most lenders do not consider mandatory deductions like PF, Gratuity, Pension Schemes etc. While a common consensus is that the approved amount is usually 70-80 times the net monthly salary, this is not a bona fide rule, other considerations are also part of the final calculation. Credit Score Your home loan eligibility is also dependent on your credit score. Due to the large amounts and long tenure, it is natural for the lending institutions to be risk-averse and aim to safeguard their loan. The credit score is like your financial report card and maintains a history of your previous credit repayments. This profiling helps the lenders factor in the risk cost and arrive at the final loan amount to be sanctioned. Most lenders prefer a minimum credit score of 750 or above. Repayment Capacity The net salary is an indicator of how much you earn presently. However, it may not necessarily be the optimum measurement of your repaying capacity. This can be due to existing loans or other monthly expenses / financial obligations. While securing a new home loan, the lenders will inquire about your monthly expenses to understand how much net income is left to repay the potential loan amount being considered. [B-02] In Summation As you must have learnt, there is a combination of factors that come together to determine the final approved loan amount. One needs to be mindful of these in order to secure the best home loan. Your home loan eligibility can be enhanced by following some best practices, like: Ensuring timely payment of credit cards and other bills to keep a healthy credit score. Keeping a clear record of your monthly income and expenses to ascertain your repayment capacity clearly. Choosing a restructured repayment plan so that your monthly EMIs are defined, and financial health can be maintained to avoid any defaulting or bouncing of cheques. Adding a family member as a co-applicant to increase your repayment ability and distribution of risk.
People spend decades of their lives working with the ambition of owning their own home and nurturing their families in it. Home loan is the most common tool which empowers people to accomplish this dream. With so many banks and other kinds of lending institutions offering home loans online, it is advisable to understand the different terminology associated with home loans. This ensures you are well aware of the concepts involved and can make an informed decision while choosing the ideal lender to partner in this journey. In the next section, we will inform you regarding the most common terms worth knowing about while securing a home loan. [B-01] List of Home Loan Terms Home Loan: This term in itself is an umbrella under which there can be several types. Let us quickly examine the most common types of home loans. Home Purchase Loan: Used for the purpose of purchasing a ready-to-move or under construction flat/apartment/home. Home Construction loan: Used for people who own land/plot or are looking to buy one and have their home constructed as per their plans. Home improvement loan: Used for renovating or making improvements, repairs to an existing property. Home extension loan: Used to undertake remodelling, additions of rooms, rebuilding or addition of floor to the existing property. Land Purchase Loan: Used to purchase a plot of land to construct your home. Such loans are usually taken by people looking to build farm-houses, bungalows and villas, and the plot serves as the collateral. Collateral/Security: Since the amounts borrowed are large and repayment duration is long, the lending financial institutions require some sort of security as assurance. In the case of home loans, this is in the form of the property in itself is considered collateral. In case of failure to repay the entire loan in a timely fashion, the lender holds the right to liquidate or sell off the property as re-compensation. Down Payment / Margin: Used interchangeably, this term means the upfront amount which needs to be paid to secure rights to the property. In other words, it is the difference between the overall price of the property being purchased and the loan availed. Some experts suggest the thumb rule of 80% loan and 20% down payment, but this is subject to the terms and conditions of the lender and the borrower’s credit history plus financial capacity. Credit Appraisal / Rating / Assessment: As mentioned in the previous point, the borrowing limit and associated terms and conditions are largely dependent on the borrower’s financial history. This comes under the term of Credit Assessment. Each lender needs to ensure that the likelihood of repayment of the loan is high and stable. To establish this, several factors are considered before the loan application and final amount is approved. Your home loan eligibility is highly dependent on this aspect. Loan to value ratio (LTV): This is a basic mathematical calculation under which the total loan amount is divided by the total value of the property. For example, for a property worth 50 Lakhs, if the loan taken is 30 Lakhs, then the LTV becomes 60%. EMI: Equated Monthly Installments (EMI) is the combination of principal + interest which is calculated as per the overall amount to be repaid and tenure to be repaid in. These EMIs need to be paid within the predetermined frequency and date to avoid additional charges and penalties. Pre-EMI: This term is prevalent mostly in regards to under-construction properties. Before the EMI payments begin, the borrower must pay the lender an interest rate on the partially disbursed amount for securing the rights to the said property. This is known as Pre-EMI. Fixed interest rate: As the name suggests, this means that the home loan needs to be paid at a fixed rate throughout the tenure, resulting in the same monthly installments and ease of calculation and future financial planning. Floating interest rate: Another way of determining the home loan interest rate is through the mechanism of floating interest. It fluctuates or floats as per the prevalent market conditions. This can result in different EMIs each month but can also be beneficial in the long run. [B-02] Conclusion: In the list discussed above, there would be some terms which the reader would be well versed with. But, it is recommended to understand each term and its implications to avoid any unpleasant surprises or having to pay charges that were not factored into your financial plan.