What Category Of Borrower Are You?
We all have different temperaments. Each one of us, as a result of this, handles our debt differently. Before we think of applying for a home loan, we must have a clear understanding about what sort of borrower we are going to be. We may have to make certain behavioural changes accordingly to make the most of the opportunity banks provide us in the form of loans. Well, they do charge you an interest, but they also help you own a property much sooner than you actually could if you were to rely on your own self to make the purchase.
You treat it as a necessary evil
Given a choice, you would not take a loan, ever. Your parents saved their entire lives and managed to buy a home in the dusk years of their life, using their own money. No bank assistance was needed. They may have suffered the obvious pains of opting for rental living spaces, but they did not have the sword of equated monthly installment (EMI) hanging over their heads. From where you see it, that is the best approach. You, on the other hand, do not have a choice but to apply for a home loan. No matter how much you saved, you may not be able to have enough savings to buy a house even after retirement, considering prices have skyrocketed since your parents became property owners. There is also that societal pressure on you to have a home as soon as you can. A borrower with this tendency would most certainly linger before applying for a loan, and will always be in a hurry to get rid of the burden as soon as he can without giving much thought to the advantages or the disadvantages of making hurried moves. Understandably, you may end up suffering losses in your pursuit to stay debt free.
Do note: Banks may take a little while to warm up to you because you may not have a credit history.
You cannot stop reacting
Some of us are over-eager by nature. This would reflect clearly in our borrowing behaviour. You are driven to make a quick jump as soon as you read about rate reductions. You may forget that rate reductions would work well for you only if your current financial position is strong. Once you have taken a loan and are servicing it, you would keep your eyes wide open and switch your loan to another bank if they offer you lower rates. Even at the risk of upsetting your current lender, who may be willing to offer you a similar deal, you exit in a hurry. Much to your dismay, your previous lender decided to reduce rates the very next month. While your loan is linked to a floating rate of interest, you realise the many benefits of having it linked with at a fixed rate. Quickly, you get that alteration done.
Do note: Your swift moves may upset banks. Not to mention the fact that you may also lose money if you decide not to stay put even for a second.
Someone else did it for you
You like others to make your decisions for you, and then you blame them if things do not go as well as you like them to go. So, it was your parents and wife who convinced you to apply for s loan. Because you are going to pay the EMI, you start cribbing about it. Because you do not like to take the matters directly in your own hands, you would keep on paying the EMI without even trying to find ways to reduce the burden. Unless your parents and wife can save enough money and convince you to pre-pay your loan, you will continue living miserably.
Do note: In your inert state, you in all likelihood would lose out on all the new offers that banks keep coming up with.
You know what you are doing
Believe it or not, not many borrowers fall in this category. While many loan seekers enter the world of borrowing unarmed, others understand only parts of the process. These types of borrowers either start by opting for the wrong plan or keep doing wrong in other various ways. Not so with the kind of borrowers we are going to talk about here. This sort knows that it requires a home loan. It would help in several ways. Apart from the obvious benefit of owning a home, this borrower also knows all about the tax rebates he would enjoy. It would only be after saving enough money to make a substantial down-payment that this borrower would approach banks. In the meantime, he would do his research about products and their merits. He would decide to switch his lender or pre-pay his loan only after doing all the calculations.
Do note: Banks cannot baffle this category of borrower; they dazzle them instead.