Here’s How You Can Choose the Correct Home Loan

Meet Roma and Rishabh for the Correct Home Loan a newlywed couple with dreams of owning their own home. Like many aspiring homeowners, they quickly realized that achieving this dream would require a home loan. But before they took the plunge, they wanted to make sure they chose the right home loan that would not only suit their needs but also be financially viable in the long run. Join Roma and Rishabh on their quest to find the perfect home loan as we explore what home loans are, their importance, and their numerous benefits.

Home loan – what is it and what are the reasons for its growing importance?

A home loan also called a housing loan is nothing, but a financial instrument formed to assist individuals in buying or constructing their homes. The significance of home loans cannot be turned down. Read on to know why –

Tax benefits

Home loans come with tax benefits under sections 24(b) and 80C of the Income Tax Act, helping borrowers save on both interest and principal amounts.

Financial assistance

Home loans offer the required financial help to purchase a home, which would otherwise be unaffordable for many.

Easier resale

Owning a home makes it easier to sell in the future, providing liquidity if needed.


Freedom from rental payments and the ability to personalise your space.

Retirement planning

It’s a crucial part of retirement planning, ensuring you have a place to live without financial worries.

Sense of achievement

The pride of homeownership and achieving a significant life goal.

Capital appreciation

The value of your property is likely to appreciate over time, increasing your wealth.

Building credit

Timely payments on a home loan can boost your credit score.

Freedom to renovate

You can modify and renovate your home as per your preferences.

Community and neighbourhood

Becoming part of a community and neighbourhood.

Now that you know the significance of home loans and their distinct benefits, it is time to understand the points you must factor in, considering home loan interest rates all banks offer.

How to choose the right home loan?

Set a budget

Depending on your evaluation of your finances, create a budget for your home. This will endow you with an idea of the loan proceeds you require.

Example: Rishabh and Roma decided they could afford comfortably a home loan proceeds of as high as Rs 50 lakh.

Assess your financial situation

Before you start shopping for a home loan, analyse your current financial situation. Compute your expenditures, income, and prevailing debts. This will assist you in deciding how much you can borrow as per your affordability.

Example: Rishabh and Roma sat down to assess their overall income, involving both their earnings and their month-on-month expenditures, which included groceries, bills, and other necessities.

Check your credit score

A good credit score is crucial for getting a favourable home loan interest rate. Obtain your credit report and work on improving your score if needed.

Example: Roma and Rishabh checked their credit scores and found them to be in good standing.

Consider loan types

Understand the distinct home loan kinds available, like floating interest rate, fixed interest rate and hybrid interest rate loans. Select the one that matches your goals.

Example: Roma and Rishabh decided that a floating-rate home loan would be best, as it offered flexibility with changing interest rates.

Research different lenders

India has numerous banks and financial institutions offering home loans. Research and compare their home loan interest rates, terms, and conditions.

Example: Roma and Rishabh visited various bank websites and spoke to loan officers to gather information on interest rates.

Home loan eligibility

Check the eligibility criteria of different lenders to ensure you qualify for their loans.

Example: Roma and Rishabh ensured they met the eligibility criteria set by their chosen bank.

Loan tenure

Decide on the loan tenure that suits you. A longer tenure results in lower EMIs but higher overall interest payments.

Example: Roma and Rishabh chose a loan tenure of 20 years to keep their EMIs affordable.

Interest rate trends

Keep an eye on interest rate trends in the Indian market. Opt for a loan when rates are favourable.

Example: Roma and Rishabh monitored the Reserve Bank of India’s announcements and noted that interest rates were expected to remain stable for a while.

Hidden costs

Be aware of any hidden costs like processing fees, prepayment penalties, and administrative charges.

Example: Roma and Rishabh scrutinised the loan agreement for any hidden costs and clarified with the bank if needed.

Customer service

Assess the quality of customer service provided by the lender, as it can be crucial during your loan tenure.

Example: Roma and Rishabh read reviews and sought recommendations from friends to gauge the level of customer service offered by their chosen bank.

Loan features

Explore additional features offered by lenders, such as part-payment facilities, overdraft options, and interest-only periods.

Example: Roma and Rishabh found a bank that offered a part-payment facility, which would help them reduce the loan tenure if they had extra funds in the future.


Prepare all necessary documents meticulously to streamline the loan application process.

Example: Roma and Rishabh gathered their identity and address proofs, income documents, and property-related papers.


Never hesitate to negotiate the rate of interest and other conditions with the lender to avail the best home loan deal.

Example: Roma and Rishabh negotiated with the bank and managed to secure a slightly lower interest rate.


Consider obtaining pre-approval for your home loan. It strengthens your bargaining power while negotiating with sellers.

Example: Roma and Rishabh obtained pre-approval from their bank, which gave them confidence while house hunting.


Consider home loan insurance to protect your family from the burden of repayment in case of unforeseen events.

Example: Roma and Rishabh opted for home loan insurance for added security.

Emergency fund

Ensure you have an emergency fund in place to cover unexpected expenses during the loan tenure.

Example: Roma and Rishabh decided to maintain an emergency fund equal to six months’ worth of their EMIs.

Regular repayments

Once you secure the loan, make timely and regular repayments to build a good credit history and avoid penalties.

Example: Roma and Rishabh set up automatic monthly payments to ensure they never missed a due date.

Plan for future expenses

Consider future expenses such as children’s education and factor them into your financial planning.

Example: Roma and Rishabh included future educational expenses for their children in their financial plan, ensuring they could afford both the home loan and education.

Review periodically

Periodically review your home loan to see if there are opportunities to refinance at lower interest rates.

Example: After a few years, Roma and Rishabh explored refinancing options and managed to get a better interest rate.

Selecting the correct home loan is an essential decision that includes in-depth research, attention to detail, and financial planning. By religiously following these measures, you can make a well-defined choice and begin your journey towards owning a home.

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