What is a Home Loan?

Borrower can claim tax deduction on the total principal and interest that they had paid to bank in a financial year.

Define Home Loan –

A home loan is a type of loan that bank provide to purchase or construct a property by offering it’s as collateral. Applicants can use the home loan for both buying a home and getting a home constructed for them. Like all other loans, borrowers must pay back this loan as per the agreed terms with the bank.

Borrower can claim tax deduction on the total principal and interest that they had paid to bank in a financial year. Applicant can apply for the loan and submit the required documents. Applicant would be required to submit identity proof, address proof, bank statement, salary slips, form 16, and pan card along the photograph. Post this the bank check the credit worthiness of the applicant, visit the property, check the property documents and then would make the loan offer. They can also contact the office to cross check the employment situation.

Post acceptance of the offer, the funds are transferred to the applicant’s bank account for construction at different stages of house work. It means that the amount will be transferred to the applicants at different stages of construction. In case the loan is requested for purchasing the property, the fund is transferred to the seller of the property. Borrower would need to then make the monthly payments to the bank.

Monthly payments depend upon the loan amount, loan tenure and interest rate. Interest rate will also depend on the credit history, loan tenure, occupation, income etc. The interest rates of home loan can be both fixed and floating.

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Home loan is basically a secured loan where bank can seize the property in case of non-payment of loans. The processing of loan does take more time in comparison to the other loans. There is also the option of co-applicant in the home loan. Applicant has to give the original documents of the property to the bank for the loan to be sanctioned.

Once the loan is paid off completely, the bank will give the documents back to the applicant. Applicant can also pay off the loan before the expiry of the loan duration and prepay the entire amount with no charges.

Harish Yadav

Harish Yadav is the regular reader of different newspapers and articles and writes about Financing and Investments. He also often writes for breaking news.

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