What is a
Home Loan?

A home loan is a secured loan taken from a financial institution to buy a new or a resale home, construct a home or renovate or extend an existing home. A loan which is taken against a property, which is already owned by the person is called loan against property (or LAP)

In both these types of loans, i.e Home loan or LAP, the property under question is used as collateral. The money is borrowed at a specific interest rate and repaid within a particular duration in smaller instalments known as EMIs (Equated monthly instalments)..

Flexible Rate and Fixed Interest Rate
Home Loans

A Fixed ROI loan is a loan where the rate of interest on the loan charged by the bank is fixed throughout the tenure of the loan, while in a Flexible rate loan, the ROI changes with the change in Base rate of the bank. Banks offer a choice to the customer to opt for a flexible home loan rate of interest or a fixed rate of interest. If a customer believes that rates are going to constantly rise in the future, then he may decide to opt for a fixed ROI.

However, if he/she thinks that current ROI is high and in future the rates are going to decrease, then they may opt for a flexible ROI. However, fixed rate loans are uncommon these days, because the rates are fluctuating very wildly, and it is difficult to predict with certainty whether the rates are going to constantly rise or constantly fall in the future. Hence Flexi rates are commonly adopted.

Types of Home Loans

Home Loans

This is the most common type of home loan. This loan is meant for buying a new apartment, row house, or bungalow, from a developer or a development authority, or from an existing owner. The property under question can be a ready to move in property, or a property under construction.

Home Construction Loan

You can avail a home construction loan if you already own a plot and require funds for the construction of the house on that land. In this case, banks normally make payments directly to the agency/builder who is constructing the house, against bills.

House Renovation Loan

If you already own a house and want to renovate it, you can apply for a house renovation loan. You can avail a house renovation loan for painting, tiling, roof repairs, etc. The loan amount is disbursed to the contractor/builder who is renovating the house, on the basis of bills raised for the work done.

Home Extension Loan

As your family grows, you may need a bigger house to accommodate all the members comfortably. A home extension loan could be helpful in such a situation. You can use this loan to fund the cost of adding a new room/floor to your home, extending the kitchen, building a new bathroom, etc.

Balance Transfer Loan (BT)

Housing Finance Companies (HFCs) and banks offer this this type of loan that allows you to transfer your existing home loan from one lender to another. A Balance Transfer is usually done to get loans at a lower interest rate, flexible repayment terms and sometimes for additional loan, which is called top-up loan.

Benefits of Home Loan?

Tax benefits

A Home Loan allows you to claim income tax deductions on the interest and principal amount due. Under the Income Tax Act, 1961, as per Section 80C, you can claim up to INR 1.5 lakh on principal repayments, and up to INR 2 lakh on interest repayments under Section 24B.

Due Diligence

When you apply for a Home Loan, banks check the property from a legal standpoint and ensure that the documents are valid and the title is clear. This step can prevent you from being scammed and passing this due diligence test can validate your ownership of property.

Long repayment tenure

Unlike any other loans, home loans come with longer repayment tenure, sometimes even as high as 25-30 years. Spreading the loan amount and corresponding interest over a longer tenure reduces the monthly EMIs thereby enabling capacity to take a higher amount.

No prepayment penalty

When you take a floating-rate home loan, you can make prepayments towards the loan whenever you have a lump sum at hand without having to pay any prepayment penalty. This will help you close the home loan much before the set loan tenure.

Balance transfer facility

You can transfer the home loan from one lender to another for several reasons, such as the better interest rate, additional amount, better repayment terms, customer service experience, etc.

Interest Rate

When compared to the various kinds of loans available, the interest rate on a Home Loan is the lowest. When compared to the various kinds of loans available, the interest rate on a Home Loan is the lowest.

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Eligibility criteria for Home Loan

LTV or loan to value

Loan to Value or LTV ratio is the ratio of loan amount against the value of asset purchased. A higher LTV means that the loan amount in comparison to the equity component in the loan is higher. Normally, banks offer upto 75-80% of the value of property as loan. Some home loan lenders also offer lower interest rates to applicants opting for lower LTV ratios.

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Financial eligibility

Banks or financial institutions check the financial capability of the person taking the loan, to assess whether he/she shall be able to pay all the EMIs timely. This depends on many factors such as salary/income, age, location, credit score (cibil), work experience and other financial obligations of an individual by calculating FOIR and LTV.

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Dealplexus offers you

Maximum loan amount

You may be looking to get maximum loan amount irrespective of the rate of interest

Lowest Interest rate

You may choose to take home loan from a Bank which offers the lowest interest rate

Minimum processing fee

At times you may want to choose a Bank which charges minimum or Nil processing fees

Quick disbursement

You may be looking to get a quick disbursal of loan due to some urgency

Long repayment tenure

Some want to maximise the loan amount or want to pay smaller EMIs per month. In that case, the first choice is the bank or NBFC which is offering the highest loan tenure.

Online process

Some Banks and NBFCs have also introduced online loan application process, which has minimised the paperwork and time for processing, which may become your reason for choosing a financing partner.

Documents Required for Home Loan

Typically the following documents are required to be submitted to the lending institution while applying for a home loan:

  • Proof of identity: This should be an official document which contains your name and photograph. Could be either your driving license, passport, voter’s ID, PAN card, Employee ID (if the company is registered), etc.
  • Proof of residence: A document that verifies your residence address could be either your phone / internet bill, rental agreement, bank account statement, gas bill, electricity bill etc
  • Bank statements of last 6 months
  • Salary Slips of last 3 months (for salaried individual) and financial statements (i.e Profit and Loss a/c and Balance Sheet (for business applicants)
  • Income proof: This can be your ITR/Form 16 of last 3 years
  • Property Documents

For more detail on documents required or the process, you may connect with our support team at : support@dealplexus.com

Frequently Asked Questions

What is a secured business loan?

A secured business loan is a type of loan that requires collateral or specific assets to be pledged as security. The collateral serves as a form of protection for the lender in case the borrower defaults on the loan.

How does a secured business loan differ from an unsecured loan?

Unlike an unsecured loan that does not require collateral, a secured business loan requires the borrower to pledge specific assets as security. If the borrower defaults on the loan, the lender has the right to seize and sell the collateral to recover the outstanding debt.

What types of assets can be used as collateral for a secured business loan?

Various assets can be used as collateral for a secured business loan, including real estate properties, equipment, inventory, accounts receivable, or even personal assets of the business owner. The specific assets accepted as collateral may vary depending on the lender's policies.

How is the value of the collateral decided?

The collateral valuation process involves assessing the value of the assets being used as collateral. This is typically done by an appraiser or valuer, who possesses the requisite skill and professional expertise to value the specific asset. The value of the collateral helps determine the loan amount and the maximum borrowing limit.

What are the benefits of a secured business loan?

Secured business loans often come with lower interest rates compared to unsecured loans. They provide greater security for the lender, which can result in higher borrowing amounts and longer repayment terms for the borrower.

How long does it take to get approval for a secured business loan?

The approval timeline for a secured business loan can vary depending on the lender and the complexity of the loan application. It may involve a thorough evaluation of the collateral and the borrower's financials. The timeline can range from a few weeks to a couple of months.

Can I use existing assets in my business as collateral?

Yes, existing assets in your business can often be used as collateral for a secured business loan. This can include equipment, inventory, accounts receivable, or real estate owned by the business. The specific assets that can be used as collateral may vary depending on the lender's requirements.

What happens if I default on a secured business loan?

If you default on a secured business loan, the lender has the right to seize and sell the collateral to recover the outstanding debt. It's important to understand the terms and conditions of the loan agreement and avoid defaulting on the loan.

How can Dealplexus help me in getting the required finance for my business?

Dealplexus has partnered with numerous banks, NBFCs, Fintechs and Funds who provide a wide variety of business loans to suit the increasing and multiple needs of the businesses. New and innovative solutions have been designed to cater to every type of funding need of all businesses, big or small, trading, manufacturing or service provider. Do write to us at support@dealplexus.com to know how we can help you in securing the best financing solution for your business.

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