How to choose your home loan lender

Ragini Kadam, a Bangalore-based techie, just chose the bank which was offereing quick home loan. She did not go hunting for a home loan and did not realise she had to bear a whole host of hidden charges and higher interest rate.
"When I took this loan from a private bank, I was given a sanction letter in 15 days. If I had waited a little longer and opted for a public sector bank I would have saved a lot in terms of foreclosure charges and interest rates. But I was in a tearing hurry. The excitement to buy the house quickly and the persuasive salesman made me chose this bank," said Kadam.
To help you understand the process of borrowing, we list the following important factors to consider:

Choose a well-known lender: Every bank or housing finance company has its own method of screening process when it comes to granting a home loan. While some of them process it quickly, others take their own time. Just because a few lenders take some time to process your loan application does not mean that the home loan comes to you with a raw deal. In many cases, such banks provide exceptional services to the customers. So it is very important to opt for a reliable lender.
Loan approval process: Some banks take a couple of weeks to process your loan application while others may take up to a couple of months. You should understand that private sector banks like HDFC, Kotak, Axis Bank, ICICI Bank, and foreign banks like Standard Chartered Bank, HSBC and others do it faster than public sector banks. While the public sector bank may have lesser processing fee, they may take up to three months for disbursal in some cases. Many of customers also prefer a bank with good internet banking facilities. So, every bank has its own pros and cons. You need to choose the one that suits your requirements.

Eligibility: Your eligibility is decided after you submit your duly filled loan application form along with documents required to process the loan. Lenders will need your bank statement reflecting the transactions for the last six months, income proof in the form salary slip and Form 16 for the last three years, copy of you PAN card, age and address proofs. After you submit the documents, the bank will do due diligence by pulling out your Cibil credit score to check your credit history.

Loan repayment: Read the entire loan document to understand the terms and conditions well before you take on the loan. Read the settlement and foreclosure clauses in detail, because these are the areas where many of the customers end up feeling that they are being overcharged.
Borrowing costs: Taking a home loan means incurring a few expenses to get the loan. It includes the following:

Processing fees
Service tax
Franking charges that are applicable for registering the loan document
Interest as applicable. It could be fixed or floating. We should calculate your costs in actual terms and not fall for percentage games
Prepayment and foreclosure charges: Please note that the Reserve Bank of India has banned these charges on home loan. So if there is any bank charging them, you need to talk to your bank about it.

Weigh in all these options as it is going to be a long-term relationship that you will be having with your lender. If you do this much of back grounding before you sign on the dotted line, your loan repayment years will be a peaceful course.

The writer is director & co-founder, www.creditvidya.com