Financial planning very necessary in present time frame

People that are planning to borrow a home loan might be in dilemma to go pr not to go for the loans due to the continuous hike in the lending rates that has made home loans far more expensive then they used to cost a couple of years earlier.

The lending rates have gone up by 200 basis points in the last two years and the rates and the rates are further expected to up in the future. It can be very difficult for a borrower to decide make a decision of borrowing loan at this instant of time.

A person can not do much about the soaring rate but he must do whatever he can do to counter balance the effect of the inflated loan rates. It is very necessary for a borrower to evaluate himself the time he plans of borrowing home loan.

A loan is meant to get benefits out of it in the broader frame of time but if the loan has potential to cause loss or if the loan leaves a person bankrupt then there is no use of borrowing, hence he must avoid, borrowing the loan.

The best thing at this point of time is to wait, and if a person really needs to borrow a loan then he must ensure that he is financially sound enough to handle the loan. Hence financial planning holds prime importance here.

Even for the people that have put their borrowing plans on hold must start planning; they must try to repay their current borrowings as soon as possible and keeping their future requirements in mind they must start saving the finds that cab later be utilized while borrowing other loan as there is certainty that the loan rate will fall and even if they fall any one is not really in a position to predict the time.

To make the most of the time that he gained by delaying his borrowing schedule he can make use of the fixed deposits and the recurring deposit schemes, that can help him to earn some interest on the finds that his saving that can come quite handy at the time of borrowing even if the loan rates do not fall even then.

Applying for bankruptcy, are you sure?

If a person is unable to pay his debts that borrower owes then the person is declared as bankrupt. Some people often considers it as an option that leads to home loan modification; but before a borrower is declared as bankrupt the lenders investigates all the borrowings of a person and if they are very much then the lender might reject the idea of modification of home loans.

In most of the cases where a borrower has applied for bankruptcy has ended with foreclosure of their loans, there are very less chances that the lender agrees for the home loan modification. So, a borrower must calculate the risk involved before he applies for bankruptcy with the bank.

The decision of bankruptcy will also have significant affect on the credit score of the borrower as bankruptcy is reflected in the credit record of a person for up to 10 years and hence can also affect the future borrowing plans.

Why one needs to worry about his credit score?

When a customer approaches a lender with loan application, the lender asks for several documents that accounts for the total inflow and out flow of the funds and that is how the lender puts an estimation of the loan eligibility of a borrower but there is another very crucial document that the lender considers and on which the fate of loan application largely depends.

The document is provided by CIBIL (Credit Information Bureau (India) Ltd.) known as Credit Information Report (CIR), it accounts for all the borrowings of the applicant. The lenders that are member of CIBIL provides the details of the borrowings of the customer and that is how CIBIL prepares a detailed report of the credit history of the borrower and in turn the member lenders can access the Credit Information Report(CIR) of a borrower.

On the basis of CIR, CIBIL also prepares credit score of the borrower; it ranges from 300 to 900 points, where higher credit score establishes the higher credit worthiness of a borrower. Earlier a borrower only has access to CIR but now a customer can get his credit score by paying Rs. 450 as fee.

Credit score is far more than a number as it reflects the credit worthiness of an individual. The lenders evaluates the risk involved in a lending a customer on the basis of his credit score, sometimes a lender can even reject the loan application merely on the basis of his credit score.

On the other hand, if a borrower holds a impressive credit score then a lender can even offer him loan on a lower interest rate or a borrower can ask for some add on facilities. So, credit score is of vital importance for a customer who intends to borrow loan.