The tenure of a loan is the stipulated time within which the borrower has to repay the sanctioned amount with the interest quotient. It is the period that lies in between the date of the disbursement of the loan amount and the date of the payment of the last EMI or the date of loan closure. Several factors influence the choice of tenure of a home loan. The loan amount, rate of interest, the quantum of the EMI, the age of the borrower, etc. are some major factors that significantly increase or decrease the period stipulated for the repayment of a loan.
A home loan comes with terms and conditions that are mutually agreed upon by the borrower and lender after negotiation. Other than these terms and conditions though, some rules and regulations are in place to regulate the disbursement of loans for the mutual benefit of borrowers and lenders. These regulations are implemented after taking into account common practices and conventions that are in common use in the lending business. Questions of guarantee and security are usually answered by the terms and conditions. But, in case the answers are not found in the terms, then the parties find the regulation in effect. This article seeks to explain questions related to prepayment, guarantee, security and eligibility when availing a home loan.
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Can I repay the loan ahead of schedule?
First and foremost, no condition can prevent the borrower from repaying a loan ahead of schedule or before time. However, lenders can impose prepayment penalties to dissuade the borrower from prepaying a loan. But such penalties cannot be introduced without taking the borrower’s consent during the time of negotiation of terms and conditions of the home loan.
- The borrower can bring down the quantum of prepayment penalties to be levied and save a great amount of money in interest payments by ending his liability in advance.
- In the case of prepayment, there is no outstanding balance left for further payment of EMIs.
- Prepayment also frees a person from keeping track of EMIs and the outstanding balance upon which interest payments are made for the stipulated period which may extend for decades!
Do I need a guarantor to get a home loan?
There is no mandatory requirement of a guarantor for the availing of a home loan. However some lenders insist on a personal guarantor in case you fail to discharge your liability, Usually, an individual is made guarantor. The borrower has the primary liability of repaying the loan amount and a lender insists for a guarantor for though his liability is secondary, it is activated when the borrower defaults in repaying the loan.
Guarantors are usually required when a borrower fails to meet the criteria of the lenders. For instance, if a borrower’s income is variable and irregular, a bank may insist on the requirement of a guarantor for assurance. Guarantors usually pledge their assets to back up the credibility of a borrower.
Do I need to furnish any security to get a home loan?
Usually lenders insist on some form of security being furnished for the disbursement of a home loan. This is to secure its money in case the borrower defaults in repaying the sanctioned money.
- The borrower is made to put up money for a down payment which will be around 10% to 30% of the property value of the house. The remaining value is covered by the sanctioned loan amount which has to be rapid in periodic installments.
- Lenders will also ask borrowers to give the first mortgage on the property to the lender and ask them to deposit the original title deed and other property documents with the bank.
So, yes you can expect a lender to ask you to furnish security in return for the sanctioned home loan.
Can a single woman get a loan?
Yes, a single woman who fulfills the eligibility criteria set by a bank for availing home loans is eligible for availing home loans.
- However, single women do face discrimination at the hands of lenders who believe that loans should not be disbursed to people who need it, but to people who can pay it back
- The applicability of the eligibility criteria is purely dependent on the credit-worthiness of a potential borrower, their employment and financial status, and to a certain extent, the age.
- If a woman fulfills all these criteria, a lender should not follow a discriminatory mindset citing that women are ineligible for a loan based on gender.
- However, lenders cite that on a statistical basis women are less likely to repay their loans due to a dearth of employment among women. Hence, if a woman applies for a loan, lenders insist on a co-applicant for assurance that in case of default, repossession of property is possible.
- Nowadays though, lenders have come out with offers of lower interest schemes for women. Banks like SBI (Her Ghar scheme), HDFC Bank, ICICI Bank have rolled out schemes for disbursing loans to women at concessional interest rates.
While banks insist on having co-applicants for home loans for further surety, it is not legally mandatory to have co-applicants for home loans.
Another point to be remembered is that you need to have home insurance to protect your property, but you are not legally obligated to buy it. Bankers insist on insurance for advancing loans, but it is not a mandatory requirement for you to have insurance to avail of home loans.
A home loan is a financial commitment that requires every step to be taken carefully. The terms and conditions of a home loan agreement need to be carefully negotiated in your favor. Carefully check the lending options on offer, the amounts payable through EMI, the possible tenure of the loan agreement, availability of prepayment options, and so on.
The requirement of guarantors and securities is the lender’s way of safeguarding their interests. In case, it is a requirement for the disbursement of funds, make sure you have everything set and sorted for the smooth processing of your loan application.
A solution for women to avail loans without facing discrimination is to avail funds from government banks which are bound by constitutional law to treat men and women equally. They have been interpreted as “other authorities within the territory of India” under Article 12 of the Constitution of India by the Honourable Supreme Court of India and thus obligated to uphold constitutional principles and the fundamental rights of the Indian Citizen. Therefore, a woman is bound to get a home loan without facing discrimination on the grounds of gender.