How to get best interest rate for home loans

In an online chat with get Ahead readers on October 21, Harshala Chandorkar of CIBIL answered readers' home loan queries.

Here is the unedited chat transcript:

Vinay Shukla: Is this the best time to take a home loan?

Harshala C: It depends on the purpose of taking a home loan -- is it for investment purpose or whether you will stay. Secondly, which area are looking at. If it is for investment purpose it is better to wait and watch the market. However if you are looking at occupying the property then you should look at it as per your need.

zubeda-pawaskar: Hello Sir, What are the dos and don'ts I need to know before applying for a home loan?

Harshala C: • Evaluate the home loan options and shortlist the ones that best suit your financial requirements.

• Ensure that all the documentation required along with the loan application is up to date and ready for provision. This may include PAN Card Copy, Passport Copy, Salary certificate for the previous 2 years, and latest 6 months bank statements etc

• You should also keep your latest CIBIL report and Score ready with you if the lenders require any clarifications.

• If you are planning to have a co-applicant for this loan then you must also ensure that all the documents required on behalf of the co-applicant are also ready. It is also advisable to check the co-applicants CIBIL TransUnion Score, as this is also checked by the lenders

Gurshan Gurmeet: How can I get the best rates of interest for a home loan? I earn Rs 80,000 per month, need Rs 30 lakh in loan and have a CIBIL score of 690

Harshala C: Most of the banks and home loan companies have a loan eligibility calculator on their website. Check your loan eligibility on the website. While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending home loans to consumers with a credit score of 750 and above.

Look at your won CIBIL Report to check if there are any missed payments. If yes, please ensure that you make timely payments and improve your credit history and score.

Nitin Deshmukh: What can I do if a bank rejects my home loan application citing my CIBIL credit score?

Harshala C: • Access your own CIBIL report and Score as and this will enable you to "see yourself as loan providers" do. If their credit score is low or if the credit report shows defaults and delayed payments you can always take corrective actions and improve your credit score before re-applying for the loan.

You can access your credit score and report on CIBIL's website in 3 easy steps: • Step 1: Fill online form- Visit http://rediff.ly/1gsxk and duly fill in the online request form • Step 2: Payment – Make payment of Rs. 470 via Net banking / Debit / Credit / Cash Card• Step 3: Authentication – Answer 2 questions based on your credit history

If you are successfully authenticated you can download your credit report consisting your credit score and also receive it via e-mail. If you fail the authentication then you can upload scanned copy of your identity proof and address proof on CIBIL's website. The report will then get delivered to you via express delivery

Sanjit-Srivastav: Sir, I have a loan of 3 lakhs which I am regurlarly paying the EMI for last 7 years, still the balance is around 2.70 lakhs. Now, could I request for a settlement of loan with lower principal payment. how could I approach ?

Harshala C: You can approach your bank for a settlement. But do take a note that the bank will report this loan as a 'Settled" loan since you will not fully repay the Principal Amount. This may be viewed negatively by some lenders and may hamper your ability to take loans in future.

bijaya: Sir I have a home loan of rs. 6 lac and availed the same on 2004, despite of regular repayament my balance in the said loan account is Rs. 490000/-. what can i do

Harshala C: Home loan are typically 20 year loans. The EMI has a component of interest and principal. In the beginning years the interest component is higher than the principal. In the later years the interest is lower as the prinicpal starts reducing as you pay EMIs. By the end of the loan tenure the entire loan is repaid to the bank.

Abraham Peter: Does it make sense to avail the 20-80 offer on home loans..pay 20% upfront and no EMI for the first 24 months.

Harshala C: RBI has banned the '20-80' loan schemes to protect the interests of consumers.

Vinayak Tavade: What is the catch in going for home loan from financial institutes that offer various schemes like money-back, one EMI less, no processing fees etc?

Harshala C: Before opting for any scheme check the fine prints, compare the total payment that you may make on a normal loan as against a loan under some scheme and then opt for it.

Hazal: Please advise: Best ways to improve your CIBIL score and get good interest rate on home loans?

Harshala C: Steps to improve your CIBIL TransUnion Score:• Always pay your loan/ credit card dues on time• Maintain a healthy mix of credit• Apply for new credit in moderation• Monitor your co-signed, joint accounts monthly. • Monitor the loan accounts for which you have stood as a ‘guarantor'• Review your credit score and history frequently

PANKAJ SHARMA: i have taken loan on 8-dec-2011 of amount 1650000 at the rate of 11.15% for first 60 days after that floating rate of LHPLR from LICHFL.Can u please let me know my EMI which is 17,250 should remain same for all tenure of 20 years and how will be principal amount paid to LICHFL yearly

Harshala C: You can ask your housing finance company to give you a detailed loan statement and a break up of the EMI into principal and interest. In a floating rate scheme the borrower has an option of either keeping the EMI constant and increasing the loan tenure or increasing the EMI and keep the loan tenure constant in case the interest rate increases.

samuel amanna: Dear Sir, I am able to pay an EMI upto 10,000 Per Month ,I don't have salary slip.Please advise in this regard.

Harshala C: The documents required for a Home loan are typically PAN Card Copy, Passport Copy, Salary certificate for the previous 2 years, salary slips for last 6 months and latest 6 months bank statements etc.

parag dalal: have taken loan in 1980000 from Axis bank in 2009 nad so far i have paid on 39000 . how is these possible ? my EmI payment is regular . Plz advice

Harshala C: You EMI has an interest and principal component. Please ask the bank to give you a break up of the Principal and Interest in the EMI paid on a monthly basis for the entire tenure of the loan. The interest component is higher in the initial years. As the principal reduces the interest also reduces.

byomjeet mishra: I have a CIBIL score of 563. Am I eligible for a car loan?

Harshala C: While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above.

Ravindra Jadhav: How do I know my CIBIL score?

Harshala C: You can access your CIBIL Report and CIBIL TransUnion Score on CIBIL's website in 3 easy steps:• Step 1: Fill online form- Visit http://rediff.ly/1gsxk and duly fill in the online request form • Step 2: Payment – Make payment of Rs. 470 via Net banking / Debit / Credit / Cash Card• Step 3: Authentication – Answer 2 questions based on your credit history

If you are successfully authenticated you can download your credit report consisting your credit score and also receive it via e-mail. If you fail the authentication then you can upload scanned copy of your identity proof and address proof on CIBIL's website. The report will then get delivered to you via express delivery

BHASKAR RAJARAM PRAJAPATI: IF MY CIBIL REPORT IS 749 MAY I ELIGIBLE FOR HOME LOAN

Harshala C: While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above. Do approach the bank and check with them if they will grant you a loan.

adil: Why do banks always check CIBIL score? Do they or do they not give home loans if there is a credit card dispute against my name. Why is it so important? HDFC gave me home loan despite there being two credit card disputes against my name in 2009. What could be the reason that they ignored these disputes against me and yet gave me a hoem loan?

Harshala C: Most of the banks fo check the CIBIL Report and score before sanctioning a loan as part of their risk management practices. Each bank will have its own credit policies which will determine what should be the action if there are any disputes, like the ones you have mentioned. In your case the bank may have looked at your report and taken a decision to sanction the loan.

rohilla bhan: Sir, How to get reduced Processing fees on Home loan. HDFC bank is asking me to pay stamp duty & Processing Fees (Rs. 10,000) also. What should I do? Please guide

Harshala C: If you have a good credit history and CIBIL TransUnion score the bank may waive the processing fees. You will have to pay the stamp duty for the agreement.

ramakrishna: SIR I HAVE A LOAN STILL PENDING OF 4.8 LACS. I WANT TO TAKE 40 LACS LOAN AGAIN. IS IT BETTER TO REPAY THE EARLIER LOAN OR CAN KEEP IT LIVE. I FALL IN 30%TAX SLAB , WORKING IN PUBLIC SECTOR.WHICH WILL BE BETTER OPTION.

Harshala C: When you apply for a new loan check the Rate of Interest that is being offered to you. Compare this with the Rate of Interest for you old loan. If the interest rate is higher than what is being offered today, it is better to repay the old loan.

ramakrishna: SIR,WHICH BANKS LOAN CHEAPER ?

Harshala C: Most of the banks will publish the rate of interest on the website. The rate of interest also differ basis the amount of loan. Please check the rates of the prefered banks. Many newspapers also publish the rates of interest for borrowers to do a comparison.

Piyush: I just shifted to Hyderabad and residing in Paying Guest accomodation and i am applying for housing loan from SBI.Can you tell me if residing in Paying guest accomodation can be reason for not granting loan.

Harshala C: Please check with the bank for the reason for rejection. Each banks has its own credit policies which decides whom to give a loan.

Shayana N: Which banks are offering festive offers on home loans? What are these offers?

Harshala C: Many banks are proving special offers and lower rates this festive season. Some banks have cut lending rates on select loans namely car, two-wheeler, housing, personal and consumer durable loans, and have also waived processing fees.

Ram M: If we want to close HLoan middle of the tenure, do we need to pay all the deducted amount as part of the Interest and have to pay remaining Balance amount or Do they recalculate and reduce some amount?

Harshala C: When you decide to close a Home Loan in the middle of the tenure, you will have to repay the entire Principal amount outstanding on that date. The interest for the remaining period is not payable.

dillip-mishra: SIR STANDARD CHARTERED BANK PAID MY SANCTIONED LOAN TO WRONGLY SOME BODY WITHOUT THE SITE BEING REGISTERED. THEY KEPT QUITE FOR 4 YEARS OF NON PAYMENT. NOW THEY HAVE POSTED THE CASE IN DRT FOR RECOVERY. THE CASE IS GOING ON. THEY EVEN POSTED IT ON CIBIL FOR WHICH I AM NOT NOW ELIGIBLE FOR HOME LOAN. ARE THEY CORRECT? WHAT ACTION SHOULD BE IN THIS REGARD?

Harshala C: Raise a dispute by logging in to CIBIL's Dispute Resolution webpage: http://rediff.ly/22npjProvide your name, address, date of birth, report Control Number (CN) and the nature of the dispute

CIBIL's Dispute Resolution Department will analyze and route the dispute to the lending institutions for confirmationPlease remember that CIBIL can only make changes to your report, once the lending institutions submit the updated/ corrected data.