A majority of homebuyers opt for a loan to fund their purchase. An increasing number of borrowers are choosing to apply for loans online. This is because an online application is convenient, secure, and quick. However, many individuals hesitate to use this medium because of some common myths.
Here are five common myths about applying for a loan online.
- Pre-qualification guarantees the loan disbursal
Before you choose your home, it is recommended you pre-qualify for a loan to determine your budget. Lenders consider your assets and credit score to provide you with an estimate of your loan amount eligibility. However, you must remember that lenders do not commit disbursing this amount. Pre-qualification for the home loan is only beneficial for you to search for homes that are priced within your budget.
- Faster repayment of the loan is beneficial
You may want to pay off the borrowed amount as quickly as possible. However, this does not necessarily mean huge savings for you. Investing this money in financial instruments may enable you to earn higher returns. Therefore, you must evaluate your personal financial situation before you consider paying the loan amount early.
- All home loans are the same
A common myth is that all housing loans are the same and researching the options is not required. However, loans include more than interest rate and tenure. Lenders levy additional processing fees, legal charges, and other such expenses that add to your total cost of borrowing. You must analyze these various charges levied by different financial institutions before signing on the dotted line. Comparing multiple quotes from various lenders online is advisable.
- Higher down payment is required to avail of a loan
You may think that you will need to pay a higher amount as down payment towards the housing loan before the lender disburses the borrowed amount. Furthermore, you may think that if you make a lower down payment, the rate of interest levied by the lender will increase. However, this is not true. Several financial institutions fund a majority of the price of the home. Conducting extensive research about different lenders online will help you find the best deal as per your requirements.
- Higher credit score means better loan terms
When researching about home loan online, you must have come across the importance of knowing your credit score before applying for a loan. A common misconception related to credit score is that a good score means procuring the best deals. You may think that you will be able to avail of a higher loan amount at a lower rate of interest with a good credit score. However, this score is only one of the several factors considered by lenders while approving your loan application. Factors, such as your age, income, and repayment history are also considered before approving the loan.
Having debunked some common myths about the home loan online application, availing of one may be easier now. However, reading the fine print to understand all the terms and conditions before making the decision is important.