Financial Planning is must for everybody to live a comfortable life. In financial planning, First of all, Goals are Fixed and then finance, Income; expenses are managed in such a way so your goals can be achieved without any Hiccups. Main Financial goals of a common mans are Buying a New House, Car, Marriage of children and Retirement planning.
First two financial goals i.e Buying of New House and Car are generally achieved by taking a Home Loan and Car Loan respectively. Being the major component of Financial planning it is very important to take home loan or car loan from appropriate Bank, Amount, and Interest Rate and for a suitable tenure.
So before taking the loans form bank we should take in to account following points.
- Which is the Best Bank to get Loan?
The general term used to select the appropriate bank for Home loan /car loan is which gives us loan a cheapest rate of interest. But this should not be single criteria for taking a loan from bank; we should also consider processing charges and other hidden charges and other benefits and facility provided by the bank to evaluate the Bank proposal. Major factors to evaluate the bank have been discussed as under.
- Interest Rate
Interest rate is the Major factor to decide a loan, as this is most crucial factor so we should know the every aspect of it. Whether interest is calculated on monthly balance, yearly compound rate or quarterly compound rate, whether interest is floating or fixed all such thing must be enquired first and then only we can evaluate and select the Bank for Home loan.
Generally all salaried persons have Bank accounts in which their salary is being credited on monthly basis. Banks gives scheme for employees of large companies for less interest rate or discount in processing fees or longer EMI period. so before going to other banks you should also confirm from your employer or HR department whether any scheme or such Tie up with Bank is available or not. Similar agreements are also being done by Builders or land developers or Car dealer with the Bank to facilitate the prospective customers. So before considering other Bank for loan you should first enquire from Builder/Car dealer about the scheme, if any available.
- Loan amount /EMI
These two components are also most important, If you do not get sufficient amount of loan to purchase the house/car then whole purpose of the loan is defeated. So you should confirm margin requirement from Bank. More the Margin requirement lesser the loan amount, this is the principal.
Further Emi (Equal Monthly Installment) should be such amount which you can pay easily after meeting your day to day needs or other obligations. If EMI is high as compares to your spare funds then the chances of default will be increased and it will be problematic for you. Amount of EMI can reduced by increasing the tenure of the loan but by doing this amount of interest actual paid will be increased. So you should keep a balance between two i.e EMI and Actual interest paid.
- Pre-payment Penalty
When a person has a spare funds then he can repay his loan earlier than schedule, it is called prepayment of Loan. But Few Banks are charging penalty on Prepayment of Loan. So, before availing the Loan from Bank you should also take the information/ rules regarding prepayment penalty of loan. If your incomes is irregular in nature means it is expected that you will receive income or extra surplus cash flow will be generated during the loan tenure which can be used for pre payment then it is must for you to know and consider pre payment penalty while finalasing the Bank for loan.
- Other Consideration
Other consideration which you can think of is TOP up loan; Cash credit limit, late payment charge, EMI moratorium period, online access of loan account etc.
So Overall selecting a Bank for home loan/car loan needs due care as it is important decision of Finance Planning ,wrong selection may leads to disaster.