What Is Home Loan | Home Loan Meaning, Types Of Home Loan
What is a Home Loan?
A home loan is an amount an individual borrows from a financial institution such as a housing finance company to buy a new or a resale home, construct a home or renovate or extend an existing one. The money is borrowed at a specific interest rate and repaid within a particular duration in smaller instalments known as EMIs (Equated monthly instalments).
What are the types of Housing Loans available in India?
In India, financial institutions offer different types of home loans to suit the specific needs of customers.
This is the most common type of home loan. As the name suggests, these loans are meant for buying a new apartment, row house, or bungalow, from a developer or a development authority. You can use this type of loan to purchase under-construction or ready properties.
Home Construction Loan
You can avail a home construction loan if you already own a plot and require funds for the construction of the house on that land.
House Renovation Loan
If you already own a house and want to renovate it, you can apply for a house renovation loan. You can use a house renovation loan for painting, tiling, roof repairs, etc.
Home Extension Loan
As your family grows, you may need a bigger house to accommodate all the members comfortably. A home extension loan could be helpful in such a situation. You can get this type of loan to fund the cost of adding a new room/floor to your home, extending the kitchen, building a new bathroom, etc.
If you wish to buy a plot with the intention of constructing your own home in the future, you can avail a plot loan.
Balance Transfer Loan
Housing Finance Companies (HFCs) offer this unique service that allows you to transfer your existing home loan from one lender to another. A Balance Transfer is usually done to get loans at a lower interest rate, flexible repayment terms and some other benefits.
Eligibility Criteria for Home Loans
Current age & loan repayment tenure
Your age plays a vital role in determining home loan eligibility. The younger you are, the better your chances of getting home loan approval. Also, when you are young, you can get a loan for a longer duration.
Financial profile of the customer
Income stability and quantum of income significantly impact the amount you can borrow. Whether you are a salaried employee or self-employed, you must have a steady income.
A high credit score and clean repayment records will enhance your chances of getting a faster loan approval.
Other financial obligations
Lenders evaluate the existing liabilities such as personal loans, credit card bills, car loans, etc., to ensure that you have the financial capacity to repay the home loan. If you have no liabilities, you may get your loan approved without any hassles.