Keeping Busy? 10 Things That You Shouldn’t Miss While Taking A Home Loan

While it may seem that all banks are eager to lend, the fact is that getting a loan sanctioned is still a tedious task. No wonder, why most of us often turn to loan agents for help. They offer convenience after all. However, there are also some pitfalls in this approach that may land you in soup later. To know what are they and how you can avoid them, read on the pointers below.

1. Fill up the loan application form yourself: Most borrowers prefer just signing on the dotted lines of the application form by allowing someone else to fill up their important personal details. But you shouldn’t forget that it’s a kind of a legal document. And if wrong information is captured, even mistakenly, it leads to disaster. For instance: A friend of mine told me that his wife was rejected a club membership twice on the basis of false declaration as her was filled by someone else.

2. Don’t let any phone calls go unanswered: When you are applying for a home loan, don’t be afraid to entertain a call from an unknown number. The loan process executive, verification agent, credit manager, external valuation agents will mostly call you from a landline.

In one of such cases, When the borrower received a verification call from bank, he hanged up the phone saying that “it’s a wrong number” because he 'forgot' that he has applied for a home loan as he was so tied up with work. And I don't have to tell you all, what happened to his application status.

3. Ask for a sanction letter: Do not go by the verbal commitment of your sales representative that your loan is sanctioned. All lenders issue sanction letter, which consists of the primary conditions like Loan Amount, Rate of Interest, Loan Tenure, EMI, validity of the rate applicable, and validity of the sanction letter.

For instance: In March 2015, a client of RetailLending.com escalated his concern that bank has issued him a 15 year 180 months) loan tenure in the sanction letter, when he had applied for 25 year (300 months) loan. This issue was discovered when our operations team asked for the scanned copy of the sanction letter.

4. Do not drag & delay the loan disbursement till the last date: Many people try to take the money from the bank on last of the possible dates thinking they are 'saving interest'. It is a misconception and could become a costly affair.

How is it wrong? Suppose, you get a loan sanctioned on 5th April and your seller has given you time to pay by 31st April. Most borrowers will tell the bank to 'release the demand draft on 31st morning' and ask the bank to send the DD for registration at the sub-registrar's office; at best they will allow 30th April as disbursal date. Their concern always is, “why should I pay interest on the amount from 10th till 31st, if I can pay this later? Well, it’s conceptually wrong because you pay for the number of days you borrowed the money. So, if your loan is for a 20-year term, by drawing it down early, that is 10th instead of 31st, the tenure does not increase. If your seller is willing to do the registration on 15th, I will recommend that you do it before your last date. This will save you from last moment stress. Most lenders use outsourced law firms to do the last mile connectivity of exchanging demand draft and original deed. In some states, after a couple of days of registration you get the registered deed in hand, and the deed goes under scrutiny before the DD is released by the lender's lawyer. Beside this, if you plan to take disbursal on last working day of the month, there could be manual error or even delay as banks have enormous workload during that time. All borrowers tend get the registrations done on auspicious days in India. Now if 100 registrations are happening in the city on one lender's disbursal, no wonder the law-firm's foot soldier will reach everywhere late. It simply doesn’t matter how much you scold him and make umpteen calls to the sales manager of bank threaten them to sue, you will still cut a sorry figure in front of your seller.

This example will help you understand the situation. In January 2015, right after Makar Sankranti everyone wanted to get their registrations done. They assumed that if they get their DDs cut on January 30th, they’ll be able to 'save' interest for a few days. But this is a wrong assumption!

5. Do not sign all around the pages in loan legal kit: Thankfully the RBI has stopped accepting cheques with alteration & counter-signature; else bank's unscrupulous temporary staff and frontline junior executives were asking for counter-signatures on every place in the cheque. For instance: Date, payee name, amount, amount in words, as well as signatures. The reason that they’ve stated is that "If I make a mistake, then I won't have to come to you for counter-signature." Imagine!

6. Do not sign blank loan kit: The loan kit should be at least 90% filled. Names of all applicants, Loan amount, rate, Tenure, EMI, Property address, Type of loan, Pre-closure clauses, Penal charges...should all be mentioned and written in the agreement you sign. Please strike off places like additional borrower details, etc., so that there is no possibility of any alteration.

If you are doing a balance transfer of your loan from another lender and do not know the exact amount of outstanding, please ask your sales executive or the adviser servicing you, to send a mail confirmation on the loan amount and subsequent EMI amount. Also, they should seek a written confirmation from you before they prepare the disbursement DD. Besides, you should also ask for a scanned copy of the completely filled loan kit before accepting the payment from bank to avoid confusions later.

7. Preferably, use a special pen: Better with a pen which is not commonly available in the market, like a fountain pen. This may sound like an old-school thought, but the benefit of this approach that this would push away the possibility of someone copying your signature anywhere as the ink and writing won't match.

8. Ensure you have a copy of all papers that you sign: Owing to our busy work schedule, most of us call document collection executives around 9:00 pm during the weekdays or on Sunday so that we are available at home. But, then, we forget that photocopy shops wouldn’t remain open in such odd hours.

While you will receive a signed copy of the same loan kit, there is no harm in being careful by signing the copy during the day to keep all the trouble away.

9. Post disbursal kit: Ideally, the kit should arrive at your designated address latest by 30 days from the date of disbursal, unless otherwise specified. If it does not reach you in this time, raise an alarm. No matter how busy you are, don’t let go of this important aspect of your home loan.

10. Apply for LOD, Amort, Provisional Tax certificate: Post creating the mortgage, private banks do not issue List of Documents (LOD) mortgaged with them in a charted format. But you need to have a record of all the documents that you’ve shared because the title deed of your property has been handed over to them.
The amortisation schedule which shows the principal-interest breakup month on month till closure of loan is also required for you to plan your repayments, if any.
Besides, the provisional tax certificate is one of the most important reasons you may have borrowed a loan. If you cannot submit this document in time with your employer, you will have excess tax deduction every month! So, be attentive to get these documents even if you are busy. (About the author: This article has been contributed by Sukanya Kumar, Founder and Director of RetailLending.com.)