By Sreelakshmi Bibinraj
Rising inflation is really causing worry among consumers as it would set the regulators to have more strong rules. All leading banks have hiked the percentage of interest in
home loans. If the hike is over 2 percent then that would really have an adverse impact on the real estate sector. If it is just a 0.5 percent hike it may make just a small impact on consumers, but if it is between 2-2.5 percent, then it would definitely affect the sector. The revised income tax norms may reduce the negative impact in the long term.
The Finance Minister assured that the introduction of Direct Tax Code in the next fiscal will bring more money to the tax payers pocket and will help the consumers to overcome the interest rate hike. In India there is a need for low-cost homes, a consumer report says. The data maintained by housing companies depicts the fact that there is a high demand for affordable housing loans and the average tenure the banking sector provides is seven years for a home loan. Most of the consumers pre-pay their loan when they upgrade their home which is very expensive. Borrowers can avoid this expense if you try to repay in small amounts. It is very difficult to make early repayment. You can spare some
cash for repaying by making a judicial management of your money.
Consumers can invest the cash at SIP (Systematic Investment Plan) or RD ( Recurring Deposit). The aim is to build a sizable amount after a period of time and that can fulfill a part of your requirement. You can open this at a bank or post office. The banks return is about 6%, you can easily select the tenure of the RD. On the other hand you can earn more from RD since the return is 8%. But remember that there is a lock-in of 5years. If you are choosing SIP, you can stop the SIP half way if you are in need of money. It is better to use liquid funds and liquid plus funds which will gave your short term gains with a return of 4.5-5%.
Consumers can also keep a certain portion of their bonus for partly
repaying the loan. This can decrease in the principal amount of your loan and bring down the interest costs significantly by the time you can take care of your long term financial goals also. It is the common option that the borrowers used to do with their bonus. If you pay a lump sum of amount that can have a direct impact on the home loan amount, it is better to invest the surplus in RD/SIP/liquid fund as stated above and pay the loan after earning some return on it.
We can find a month's gap between the loan disbursement and the first EMI. When we make payment it is directed towards the principal payment. This will reduce the overall cost; better pay one EMI before schedule.
If you are sure in making the dues at the earliest, then choose a scheme that allows maximum part-prepayments in a given year. There are different repayment schemes for different banks. Some banks allow once in a year repayment while others allows repayment 4-5 times a year. Even certain banks offer Home Saver Loans where the interest is to be paid by the consumer on the utilized amount. Now banks are tracking down credit card and personal loan defaulters, they are armed with a new information service. It is easy to track those defaulters who have gone missing or moved to another town to escape recovery agents.
If a borrower tries to get a new loan from some other place in the country the bank gets an email alert. The information service is provided by Credit Information Bureau of India Ltd (Cibil). Previously there were no ways for the banks to trace the defaulter; if he does not intimate the new address to the banks it was difficult for them to track such people. This service is definitely going to help the banks a lot. This is based on the parameters like date of birth and PAN number. There may be a question of privacy here, but that is strictly under the Credit Information Act where the data is shared only among lenders.
Cibil provides lenders a history of the loan transactions of a borrower. The credit history gives the details of all the loans and also it contains the details of his repayment schedule. The telecom companies are also going to adopt this to track defaults by users who change locations. There are cases where two branches of the same bank lend loans to a single borrower. So it is better to repay the loans in a wise manner.
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