You probably know Life insurance home loan is one of the biggest lenders present in the space of home loans. However, do you know LIC home loan isn’t a bank? LIC home loan is an HFC or housing finance corporation. If you are new to this umbworld of home finance, you must first ensure to understand the distinction between banks and HFCs. If you are familiar with this already, then read on to understand the reasons why LIC home loan is a popular option in the home space among many customers. Mentioned here are the top benefits of opting for a LIC home loan for funding the home of your choice –
Flexible about the documents –
LIC home loan is not very stringent with documents required for placing your home loan application. Factor in this, most lenders are very rigid regarding the ‘occupancy certificate’ of the home. Also, an occupancy certificate must just be availed from the magistrate’s office or Municipal Corporation. In contrast, LIC home loans endow you with loan proceeds based on the gram panchayat occupancy certificate in a few cases, while at times loan proceeds may be disbursed easily without the requirement for an occupancy certificate. This is an extremely rare scenario for the lender to do so and is one of the major reasons why many consider opting for the LIC home loan option.
Not rigid regarding the CIBIL score –
CIBIL score during the home loan approval is just similar to your 9th standard mark sheet during the 10th admission. Having low marks may not allow you to avail admission to the school of your choice. A low credit score, in the same way, may turn out to be a nightmare. Most bank lenders make it a point to check your credit score i.e., your CIBIL score by fetching your CIBIL report from the concerned credit bureau. And if your CIBIL score is over 750, then you hold higher chances of securing a loan deal than if your credit score is below the 750 margins. Here is where opting for a LIC home loan can come as a rescue as the HFC does not give much emphasis to your score while determining your chances of securing a home loan deal. However, note that while you may secure a home loan deal in such a case, the LIC home loan interest rates can be on the higher end because of the higher risk the HFC is taking by lending you the required funds. If you are one of those looking for a lower rate of interest on a home loan, then ensuring to keep a higher credit score is important. A higher credit score helps you earn lenders’ trust as they consider you credible and a disciplined individual who will repay the borrowed proceeds EMI timely and in full. To build a strong credit score, you must ensure to timely repay your credit card dues and loan EMIs on time and in full, maintain a balanced credit mix between unsecured and secured credit options, maintain a credit utilisation ratio or CUR of within 30 per cent, not submit multiple loan enquiries within a short time span and consider reviewing your credit report to figure out any mistake or error and report the same instantly. Once you report the mistakes or errors found in your credit report, your credit score is increased automatically.
LIC home loans allow you to avail a high loan proceeds –
When you place an application for a home loan, the lender determines your loan eligibility chances, i.e., what loan proceeds you qualify for. This is an amount, which is computed by considering your age, income, education, and credit score. When it is to loan eligibility, you often find out that a LIC home loan favours the applicant and approves a higher proceed than most banks or HFCs. In general, you can find the LIC home loan as a good match for you if you are a first-time home loan applicant. However, it is still advisable to go ahead with caution. While the LIC home loan may be helpful for you as a borrower, there are specific costs attached that you must be aware of.
Short term gain
Many who require home loans get attracted by LIC home loan as they endow higher loan proceeds and is not stringent regarding the application requirements. So, this allows you to gain over the short term as you can avail a home loan, which many banks were not ready to provide you may be owing to your lower credit score, higher fund requirement, unserviceable location, and others. Thus, once you avail the loan proceeds from the LIC home loan, ensure to opt for the balance transfer option, whenever you get a better deal with a higher credit score, so that you avail a lower interest rate and, in this way, you get to reduce your overall expense through the loan in the form of high-interest cost.
So, how’s life impacted by the rate of interest?
When you avail a loan, you generally plan your income to manage bills, children’s fees, and utilities, along with the home loan EMI. When your home loan enters the floating interest rate period and the rate is enhanced, LIC home loans tend to increase your EMI too. Imagine what type of panic you would face if suddenly Rs 5,000 is missing from your bank account. Now imagine, what would your reaction be if an additional Rs 5,000 continue getting debited every month. Inflated EMI thoroughly throws your monthly finances off track, and you may struggle hard to make ends meet every month. You can get relief if you opt for the fixed interest rate option but note that as HFCs usually have a higher interest rate than bank rates, it is recommended you either prepay your full outstanding home loan proceeds as soon as possible or go for the home loan balance transfer option at a lower interest rate to save on your overall interest constituent outgo.