Frequently Asked Questions

As an industry standard, Banks or Financial company will lend around 85% of the cost of the property you are going to buy. Rest 15% you have to pay for the property yourself.
You can pay your down payment in many ways. If you saved the money, then great. Otherwise you can take a personal loan or pledge your investment etc.

Yes definitely. There are specific Home Loans tailored for the purpose of disbursal to NRIs.

This loan facility allows a senior citizen (above 60 years of age) eligible to apply for a reverse mortgage loan and avail 60% of the value of the residential property he resides in and retain the right to continue to reside there. The maximum tenure for this loan scheme is 15 years.

To get the home loan, you should:
    1.  Be a citizen of India.
    2.  Have a regular source of income
    3.  Be a salaried individual or self-employed professional, self-employed business people, NRI individual or an existing property owners
    4.  Be above 21 years of age, when the loan period begin
    5.  Be less than 65 years when the loan period closes.

The following factors affect the Home Loan Eligilbility:
    1.  Purpose of the loan – ( purchase of property, improvement, purchase of land)
    2.  Age of the borrower
    3.  Income ( savings history )
    4.  Work and Experience & Professional Qualification ( stability and continuity of occupation )
    5.  Employer’s profile and stability
    6.  Existing financial obligations
    7.  Number of dependents
    8.  Credit Score (Past repayment history)
    9.  Resident status

Apart from actual loan amount, other charges are included in the total calculation of the home loan cost like
    1.  Registration Charges
    2.  Transfer Charges
    3.  Stamp Duty Costs

Home loans are usually accompanied by the ollowing extra costs:
    1.  Processing Charge: It is a fee paid to the lender when you apply for a loan. It could either be a fixed amount not linked to the loan or could also be a percentage of the loan amount.
    2.  Pre-payment Penalty: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/financial institutions, which could be up to 5% of the amount pre-paid amount.
    3.  Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed within a stipulated period of time after it is processed and sanctioned.
    4.  Miscellaneous Costs: Some lenders may levy a documentation or consultant charge.
    5.  Registration charges of the mortgage deed.

    1.  Some lending institutions sanction the loan without requiring you to identify a property as a prerequisite for eligibility
    2.  Free accident insurance
    3.  Discounts
    4.  Waiving of pre-payment penalty
    5.  Waiving of processing fee
    5.  Free property insurance

You can take a home loan before or after identifying the property you want to purchase or when the property is under construction or for purchasing a plot of land for investment or to renovate an existing home.

If it possible, having a co-applicant is a good thing. It makes your loan less risky which can make you eligible for more loan amount as the income of the co-applicant is also taken in consideration. You can also provide additional security like bonds, fixed deposits and LIC policies to improve your eligibility.

A co- applicant can be :
    1.  Co-owner of the property to be purchased.
    2.  Parent or spouse
    3.  Spouse if you have the marriage certificate.

Since there are many financial institutions who offer home loans, you should keep certain factors in mind while deciding the best offering for you:     1.  Total cost the loan including the loan amount and related charges.
    2.  Terms and conditions of the lender. It varies from lender to lender.
    3.  Average turnaround time for loan disbursal for each lender.

EMI stands for “Equated Monthly Installment” which is the amount of money paid back to the lender on a monthly basis. It has two parts: the principal amount and the interest on the principal amount equally divided across each month in the loan tenure. The EMI is always paid up to the bank or lender on a fixed date each month until the total amount due is paid up during the tenure.
The knowledge of EMI helps in planning the monthly budget. You can calculate the EMI with EMI calculator here.

Yes. Section 80C and Section 24 grant income tax rebates to people who have taken home loans.

Fixed Interest Rate: Interest is calculated on the full original loan amount for the whole term without taking into consideration that periodic payments reduce the amount loaned. In other words, Flat Rate of Interest basically means that interest is charged on full amount of loan throughout its loan tenure.

Reducing Interest Rate: Interest is calculated every month on the outstanding loan balance. EMI payment every month contains interest payable for the outstanding loan amount for the month plus principal repayment. On every EMI payment, outstanding loan amount reduces by the amount of principal repayment.

For more clarity, go here.

An amortization schedule is a table which contains the information of your loan amount reducing with each monthly installment. Additionally it contains the information of the components of an EMI i.e. interest and outstanding principal.

Tenure can vary up to 25 years for a home loan with the condition that the it should not extend beyond you reaching 65 years of age.

A credit history is a record of a borrower's past repayment of loans and credit card bills. The dats of your repayment history is collected by Credit Scoring Institutions like CIBIL and quantified in a term called the Credit Score. These Credit bureaus collect information from various agencies like Banks, credit card companies, collection agencies, and governments.

Yes It does. A good credit score will help you getting higher loan amount and lower interest rates. A bad credit score can hurt these parameters and can make the loan approval difficult as well.

Yes it can. Every time you apply for a loan, you credit score is checked. More the applications, more the checks which is interpreted as you increasing credit hunger. This adversely affects your credit score and thus hurts your interest rates.

Document requirement differ from bank to bank. But there is a document checklist as follows which is followed as standard by almost every lender. Please keep in mind thet the documents required are generally the subset of the checklist below:
1.  ID Proof
    >  Driving license
    >  Voters ID
    >  Passport
    >  PAN card
    >  Ration card
    >  Employee ID
    >  Bank passbook
    >  Letter from a recognized public authority or public servant verifying your photograph
    >  Confirmation letter from your employer or another bank verifying your photograph
    >  icy/ receipt
    >  Utility Bill – telephone, electricity, water, gas (less than 2 months old)
    >  Letter from any recognized public authority verifying residence address of the customer
    >  Letter from your employer

2.  Age Proof
    > Driving license
    > Passport
    > Bank passbook
    > PAN Card
    > Birth certificate
    > 10th standard mark sheet
3. Income Proof and Other Financial Documents : Self Employed
    > A brief introduction of Business/Profession
    > Balance Sheet, profit and loss account statement of income, proof of income tax return for the last 3 years certified by a CA
    > Receipts of advance tax payments if any made
    > A photocopy of Registration Certificate of establishment under Shops and Establishments Act/Factories Act
    > Registration Certificate for deduction of Profession Tax
    > Certificate of Practice
    > Receipts of Bank loans
    > Proof of investments (FD Certificates, Shares, any other fixed asset)
4. Income Proof and Other Financial Documents : Salaried
    > Latest Pay slip
    > Form 16
    > Increment/Promotion letters
    > Appointment letter
    > Pay slip (Last 2 months) with salary account bank statement
    > Certified letter from Employer
    > IT returns ( for three years )
    > Investment proof (FD certificates, shares, any fixed asset etc.)
    > Documents supporting the financial background of the borrower

    1.  Title deeds for the past of 13 years
    2.  Encumbrance certificate for the past 13 years ‘Khata’ certificate
    3.  Most recent tax receipts for the property
    4.  Approved plan
    5.  License for the extension
    6.  Cost estimate from a qualified engineer
    7.  Cost estimate from the architect

There are some things which you should help you while selecting a property:
    1.  Check if the property is approved by the government and if it is registered.
    2.  Evaluate if the location of the property and check it suits the availability of your needs like Schools, hospitals, shops, transportation facilities, the reputation of the builder, availability and consistency in the supply of power and water, security, parking facilities, location in a residential area etc.

It is a good practice to have your property insured to protect yourself from any future risk that might befall on the property. Usually property insurance comes as an incentive with your home loans after a certain period.

This is a certificate which allows the property to be mortgaged by the bank. This comes into effect in instances like a co-operative society that owns the property but whose members have a right to reside in the premises and also transfer the rights to someone else. This is also true in the case of leased land on which property is built. In this instance, the property is owned by the borrower but the land on which the property is built legally belongs to a development authority. This certificate safeguards the interests of the Bank.

The property whose documents have been already verified by a Bank. This reduces the effort and time of the Lender to verify the property when a borrower approaches the lender for the loan.

There are three steps to a home loan application –
1.  Application – Submission of completed application form with all the essential documents.
2.  Sanction – Approval for a specific loan amount based on the value of your property and repayment capabilities.
3.  Disbursement – Transfer of the loan amount to the borrower.

It varies from lender to lender. Typically it takes 1 week if all the documents has been submitted and verified including post dated cheques (PDC) or signed ECS (Electronic Clearing System) form the has been done correctly.

Loans are paid up by issuing post-dated cheques for the entire tenure of the loan, by deduction at source from your salary or by issuing standing instructions to your lender for ECS (Electronic Clearing System) where the monthly payment (EMI) will get automatically deducted every month from your bank account.

Yes you can or cannot, depending upon lenders. Some Lenders allow you to close prematurely by but in that case you will be levied a prepayment charge as penalty for the early closure. This can be up to 5% of the loan amount. Some banks do not allow you to close the loan in the first six months of the loan tenure.

Yes. You are charged a fee for late payment according to the terms of agreement.

Defaulting will adversely affect your Credit Score (CIBIL). If you have a co-applicant, it affects their credit score as well.

A home loan can be availed by an NRI for any of the following purposes:
     a) To purchase a house either ready-built, under construction or from a second owner.
     b) For self-construction of a property on a plot of land.
     c) To finance the purchase of a plot of land allotted by a society / development authority.
     d) For renovation or improvement of an existing property in India.

The eligibility for an NRI is calculated on the same lines as a resident Indian. Emphasis is placed on the following for an NRI:
     a) Qualifications – the NRI applicant has to be graduate
     b) Current job profile & past experience
     c) Probability of staying abroad for the entire loan tenure
     d) Probability of servicing the loan with an extended tenure in case you have to return to India.

The repayment period generally does not exceed 5 years. However, some institutions offer loans for a term of 7 years. The repayment is done by EMIs.

The loan towards the home has to be paid upfront for the entire tenure of the loan by way of direct remittances from abroad through normal banking channels or from accounts that are allowed by RBI. Currently, payments are done through NRO, NRE, NRNR and FCNR accounts. These accounts change on the basis of RBI permissions to each HFC.

No tax benefits are available for NRI customers.

NRIs are required to submit additional documents than is normally required for a resident Indian.
a) A copy of the passport
b) A copy of the works contract (also sometimes referred to as the contract card/labor card)
c)The power of attorney (POA). The POA is required because the borrower is not based in India and in such a scenario, the HFC would need a representative ‘in lieu of’ the NRI to deal with as required. Although not compulsory, the POA is usually drawn on the NRI’s parents, wife or children

When the resident status is changed, the repayment capacity is assessed again and a revised repayment schedule is worked out.

The new rate of interest is revised according to the rates for Resident Indian loans (for that specific loan product). This revised rate of interest would be applicable on the outstanding balance being converted.

    1.  Applicants should be aged above 18 years.
    2.  Applicants should have gold that needs to be mortgaged with the bank.

The interest rate varies depending upon the lender. It can range from 12 - 18 % per annum.

The maximum sanctioned loan amount ranges from Rs. 1500 to Rs. 1 Crore depending upon the lender (bank/financial institution) and the eligibility of the borrower.

The gold loan can be rapayed in uptp 48 part payment installments.

    1.  Nominal Processing Fee up to 2 % depending upon lender.
    2.  Gold Validation charge

It ranges from 0%-3% and is applicable on the outstanding amount of your gold loan.

If you have repaid the loan on time, then it is very simple to reclaim all of your deposited gold. In case you have defaulted or have failed to repay in the stipulated time, your gold may be auctioned.

The loan can be repaid by many mediums:
1. Cash
2. Cheque
3. Demand Draft
4. Online Fund Transfer.

Yes. Banks usually levy an annual penalty between 1% and 6%. This is in addition to the rate of interest that you would be paying to service your loan.

1. Id proof
    > Driving License
    > Pan Card
    > Form 60/61
    > Passport
    > Voter ID card
2. Address proof
    > House Registration Documents
    > Utility Bills

Yes you can. A gold loan can be repaid partially at any point in time. However, your deposited gold will only be returned once the entire loan amount has been repaid.

Yes. Absolutely. Banks understand the importance and sentimental value of your Gold. They keep it safe and protected from any risk.

Educational loans usually cover the costs of tuition fees, hostel fees, mess fee and examination fees. Some banks may also finance the cost of books, equipments and other instruments required by the student for that course. For studies abroad, banks may provide one-way air fare. But this needs to be checked with your individual bank.

There are many criteria that determine the eligibility of a student for an educational loan. These vary greatly from bank to bank. The most important criterion is that the student must have qualified for, or have a confirmed admission in a college or institute. The other factors that are normally important with nationalized banks are the age band, i.e. the student applying for the loan must be in the age group of 16-26 or some such specified range. Other criteria are good academic record (first class throughout, with no gaps or breaks in education, etc.), and a regular source of income for the parents. The recognition granted to the institution the student has opted for is also an important criterion.

The maximum loan amount varies from bank to bank, but, most importantly, it depends on the course for which the loan is sought and the institution chosen. For example, the loan amount for an M.B.A. course would be different for different institutes--the fees at I.I.M.'s would be approximately Rs 2 Lac, whereas at Somaiya it would be Rs 80,000. Hence the loan amount will vary drastically. But many banks have a margin criterion, which means that they would provide up to 75 per cent or 90 per cent of the total cost of the course, while the balance has to be paid by the applicant. The loan amount can also depend on the borrower's parents/guardians net monthly salary. The loan amount could also be calculated as being six or 10 times the monthly salary of the parent. Ultimately, however, the loan amount would depend on the discretion of the bank.

The security depends on the loan amount. It is quite possible that banks may not require security for a loan of up to Rs 25,000, but would require it for amounts greater than that. These limits are usually in slabs that vary with banks. The usual security that the banks generally take are National Savings Certificates (NSCs), bonds, gold, vehicle, house or property, etc. In addition to these, some banks might also require the applicant to have a life insurance policy equivalent to, or greater than, the loan amount.

The general documentation required by the banks for disbursing education loans is usually very simple. The most important among them is proof from the college/institute that the student has a confirmed admission there. Then comes an agreement with the students or the parents/guardians, and proof of residence. Proof of age is also important, considering that quite a few banks have a clause that they would not finance a student above a certain age limit. Also required are documents to prove that the parents/guardians have a regular source of income, namely, salary statements, IT returns, etc. And, lastly, a resume of the student, clearly showing his past academic performances.

The interest rates vary significantly from bank to bank. It is usually determined on certain slabs. For instance, for loans up to Rs. 25,000, the rate of interest would be 12 per cent, for Rs 25,001 to Rs 2 lakhs, 14 per cent, and for loans greater than Rs 2 lakhs, it would be 16 per cent. The interest rates could be fixed or variable. A fixed interest rate means that the rate of interest for the entire tenure of the loan would remain the same, whereas a variable interest rate, which depends on the Prime Lending Rate (PLR) set by the Reserve Bank of India, keeps changing half-yearly or yearly. Usually, nationalized banks follow variable interest rates, while private and foreign banks follow fixed interest rates. It is advisable to opt for variable interest rates because it has been seen, over the years, that the PLR has been dropping, and hence the interest rates applicable on the loan amount would drop correspondingly. The interest on the educational loan taken by a student starts immediately after the day of disbursal. The interest is payable on a quarterly reducing basis, calculated on a simple interest basis. But once the repayment of the actual principal starts, the interest is calculated on a compounded basis.

A holiday period is the maximum time given to the student before he/she needs to start paying back the principal loan in Equated Monthly Installments (EMIs). In other words, it is the period between the student's final examination in the course for which the loan was availed and when he/she actually starts paying the EMIs. Typically, holiday periods range from six to 12 months. Take note, however, that if the student starts working immediately after completing the course, he does not enjoy a holiday period. Repayment usually starts six months after the course completion or the commencement of a job, whichever is earlier.

Disbursement of the educational loan is made directly to the institute/college to which the student has applied for admission. In the case of mess and hostel charges, the relevant amounts are given to the concerned authorities. In the case of air fare, which is also available for studies overseas, the amount is given directly to the airlines. Some banks do give the students themselves a certain amount on a monthly or quarterly basis for purchasing books, equipments and other related material associated with the course. This, again, depends on the discretion of the bank.

When the loan amount is greater than a lakh, banks usually prefer students to have Life Insurance Corporation (LIC) policies equivalent to, or more than, the loan amount. This is nothing more than a security feature that also forms a part of your collateral. In case the student is not able to pay back the loan, the bank does not lose money on it and can recover the outstanding amount from the student's LIC policy.

In the case of educational loans taken for school/high school/graduation courses, the student is not the borrower; his/her parents or guardians are. And since it is assumed that they have a steady source of income, the loan repayment can start immediately without any holiday period. Hence the repayment starts immediately.

Yes, special privileges, in terms of eligibility and margin money, are given to Scheduled Caste/Scheduled Tribe students availing educational loans. The eligibility criteria are lowered from first/second class to pass class for SC/ST category students. Further, the margin money for them is sometimes nil or lower than the normal amount. Only nationalized banks offer these privileges to SC/ST students, and not private or foreign banks. Even with nationalized banks, one needs to properly check out these privileges beforehand.

One major criterion that banks seek is confirmed admission. So, once the student has secured a confirmed admission in an institute, along with a break-up of fees and other related issues from the college, he/she can approach a bank for an educational loan.

Yes, a good academic record is essential, but not compulsory. A lot depends on one's relations with the bank, and the bank has a sole discretion over the disbursement of the loan. Also, a lot depends on whether you are able to provide the collateral required by the bank. If both of the above factors are in your favour, you could be the lucky one to get an educational loan from the bank for your further studies.

Guarantors are essential for sanctioning of loans. Usually, a guarantor is required so that if the applicant fails or becomes incapable of repaying, the guarantor will be responsible for clearing the debt. Usually, a guarantor so chosen is a person with a net worth (i.e., annual income) equivalent to, or more than, the loan amount.

Yes, one can get an educational loan for payment seats too. Usually, the banks have a ceiling for each course, and, based on that, they decide the loan amount. So long as the loan amount does not cross that ceiling, the student can be assured a loan, provided he/she satisfies the other eligibility criteria.

Professional courses are ones that are very specialized, like M.B.A., M.C.A., M.B.B.S., Engineering, C.A, Architecture, etc. These courses are usual graduation courses spanning three to four years, but since they deal in very specialized fields, they are termed `professional courses'. `Other courses' are those that are not included in any other category, like school/graduation, post-graduate and professional courses. These could include courses like fashion designing, computer courses from reputed institutes or courses affiliated to the Department of Electronics, etc, commercial pilot's courses, and courses for fine arts.

A margin amount is the amount that the applicant pays through his/her pocket. A bank can either pay 100 per cent of the cost of studies or a certain percentage of the total cost. The margin is usually the amount not covered by the bank for the payment of the essential and necessary fees to the college/institution. Consider an example: Bank XYZ offers a loan for an M.B.A. course, and the margin is 10 per cent. Here, 90 per cent of the cost of the course will be borne by the bank and the balance 10 per cent has to be borne by the student/applicant.

This again depends on the bank and its discretion. Quite a few of the nationalized banks follow the criterion of sanctioning loans to students falling in a particular age group, e.g. 15-25 years. But this is not so with private and foreign banks. It is always safe to check with your bank first for all the details regarding eligibility.

That depends on the bank concerned. Some banks provide for air fare, applicable only once, and one-way, at the time of joining the course. This is given to students going abroad for further studies, and is not applicable for students going for domestic studies. The money for the one-way fare is given directly to the airline concerned, and not to the applicant.

Initially, this used to be important criterion with nationalized banks. Now, however, with more relaxed norms, it is not mandatory to have an account. However, if one does have an account with that particular bank, it becomes easier to get the loan sanctioned. This is because the bank can examine your past financial records and transactions, and make a decision quickly.

`Recognized' institutes refer to those that are affiliated to the State/Central universities and come under the Central government's University Grants Commission (UGC) programs or the All India Council on Technical Education (AICTE). The majority of the colleges fall within the ambit of the UGC and AICTE. `Reputed' institutes are those that are pretty well-known and have standard courses of repute. The definition of `reputed' institutions might vary with banks, which usually have a list of colleges and institutions that they consider reputed. Hence, you need to check with the bank whether it will finance courses run by that particular college/institute.

The fees for all the years will be disbursed to the college/institute directly. Initially, while applying for a loan, the bank will verify the tenure of the course, and determine the cost of the entire course, as applicable at that point of time. Then, each year, the applicant is required to submit a form available from the bank that gives the details of the money required, and then the bank directly disburses the loan to the college/institute.

Under Section 80 E of the IT Act, a deduction will be allowed in respect of repayment of loan taken for higher education, subject to the following conditions: In computing the total income of an assessee, being an individual, these shall be deducted, in accordance with, and subject to, the provisions of this section: any amount paid by him in the previous year, out of his income chargeable to tax, by way of repayment of loan, taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his/her higher education, or interest on such loan, provided that the amount that may be so deducted shall not exceed Rs 25,000. The deduction specified above shall be allowed in computing the total income in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the loan referred to above, together with the interest thereon, is paid by the assessee in full, whichever is earlier.

Most of the banks prefer not giving loans for part-time or correspondence courses, but ultimately it all depends on the bank's discretion and your relation with the bank. Since eligibility criteria are relaxed for these types of courses, and the chances of getting a good job after such courses are generally bleak, and also assuming that the applicant would be already working somewhere, banks prefer to stay away from financing these kinds of courses. But there are banks like the State Bank of India that provide students' loans for part-time and correspondence courses.

The interest portion is the amount paid by the student during the time of his course that starts immediately from the month following the loan disbursal. During the tenure of his course, he/she keeps paying interest to the bank, whereas the main principal is only paid at the end of the holiday period. EMI or Equated Monthly Installment` is the amount payable by the student after the end of the holiday period that includes a certain portion of interest and principal. EMIs are calculated on a quarterly reducing basis.

No, a minor cannot avail of an educational loan. But his parents/guardians who satisfy the eligibility criteria can do so. Banks assess the individual's repaying capacity at the time of disbursing the loan, and, hence, minors are ineligible for educational loans

If, for any untoward reason, you are unable to complete the course, you will have to start paying the EMIs immediately. Some banks might give the students some grace period, either to continue his/her studies or to start repaying the loan. But this is entirely the bank's discretion.

That depends on the bank. Nationalized banks do not have any prepayment charges, but private and foreign banks usually charge a penalty, which usually ranges from 0.25 per cent to 2 per cent of the outstanding loan amount.

If, for any untoward reason, you are unable to complete the course, you will have to start paying the EMIs immediately. Some banks might give the students some grace period, either to continue his/her studies or to start repaying the loan. But this is entirely the bank's discretion.

To determine the loan amount, your loan repayment capacity is calculated using your income, age, qualifications, number of dependants, spouse’s income, assets, liabilities, stability and continuity of occupation and savings history. Generally the loan does not exceed 60% of the market value of the property.

You can include your spouse as a co-applicant and that results in a higher amount being lent. However, if the property is co-owned, all co-owners mandatorily need to be co-applicants.

It varies from bank to bank and is generally around 1% .

Loans against property has a maximum tenure of 15 years, subject to the condition it does not exceed your retirement age. This condition however can be flexible in certain cases

Loan is repaid in Equated Monthly Installments (EMIs) which consists of principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement.

As the name implies you need to mortgage your property for availing this loan. This mortgage is Equitable mortgage by Memorandum of Entry by way of deposit of title deeds and/or such other collateral security, as may be necessary. Collateral security for by way of assignment of insurance policy or any such other assignable financial instruments are also required, as security to loan if deem necessary by the Bank.

Yes you can. Prepayment is possible and there is no prepayment fee if you repay the loan after six months of availing the loan if you pay from your own source of funds without transferring the loan.

The repayment capacity of the applicant(s) based on Resident status is reassessed and a revised repayment schedule worked out. The new rate of interest will be as per the currently applicable rate of Resident Indian loans (for that specific loan product). This revised rate of interest would be applicable on the outstanding balance being converted. A letter is given to the customer confirming the change of status.