Installment loan is the first choice of those who want to own an apartment to settle down in Saigon but have limited expenses. So, how to borrow money to buy a house on installments to avoid becoming a “debtor” of the bank? Please refer to the information below. Surely it will be extremely useful if you are intending to take out a consumer loan in general and a mortgage loan to buy real estate in particular!
What is installment loan?
Installment loan is a form of loan where you will be loaned an amount by the bank according to an agreement and the borrower is obliged to pay interest and principal according to the terms.
When taking out an installment loan, you can choose a long or short repayment period depending on your ability to pay and your family. The period that banks lend is usually within 3 months, 6 months, 9 months, 12 months, 36 months or even 60 months. This limit depends on the loan amount.
What types of installment loans are there?
# Unsecured loan
An unsecured loan is a form of loan without collateral. The bank will lend based entirely on the creditworthiness of the borrower. Unsecured loans are suitable for individuals with small needs such as shopping, entertainment, etc. Usually, customers will get unsecured loans with small amounts, high interest rates, maximum loan period is 60 month.
# Overdraft loan
This is a form of lending by banks when individual customers need to use more than the amount currently available in their current account. The limit granted is only 5 times the customer’s own salary. The required documentation usually includes an endorsement of a fixed monthly income.
# Installment loans
Installment loan is a type of loan where the interest and principal are equal each month. With this form of loan, depending on the needs and repayment capacity of each customer, there are different repayment terms and limits.
# Mortgage loan
Different from the forms of loans above. Mortgage loans are the traditional form of lending by banks. To be able to use this form of loan, customers must have collateral. Usually the mortgage loan limit is quite high. Can be up to 80% of the value of the property that customers bring to insure. Of course the interest rate matches the loan.
Mortgage loan terms can be extended up to 25 years, depending on the borrower’s needs. This is the form chosen by many individuals and businesses.
Borrowing money from a bank to buy a house on installments – the solution chosen by many people
# What is a mortgage to buy a house?
Buying a house on installment can be understood simply as a customer borrows a loan from a bank to buy a house and periodically pays both capital and interest to the bank. With this form, you only need to spend about 30-40% of the house value and the rest will be supported by the bank. The loan amount can be repaid within 10 years, 20 years, etc., depending on the regulations of each bank.
# Buying a house with installment payment is chosen by many people
With expensive real estate prices and limited capital, many people have chosen to buy a home on installments. Instead of renting a house and having to pay rent to the owner every month, you can borrow money from the bank. After a few decades, you have a home that you own if you maintain the installments on time and according to the original agreement with the customer.
However, many customers fail to do this. Even became a debtor of the bank due to late payment of interest. Or buy a house that is too big, beyond affordability. No stable source of income…
# How to avoid becoming a long-term debtor of the bank
+ You need to understand the rules of the game
Whether you get a cash loan or an online installment loan, you need to know the rules of the game. Don’t be vague. Ask the bank staff for advice and answer all your questions. Avoid borrowing money to buy a house and then be dumbfounded because you don’t know why there is such a fee.
Remember, initially, banks will offer you attractive interest rate packages of 8.5 – 9% per year. But this interest rate is only applicable for the first 6-12 months. From the 13th month onwards, customers will be subject to a new interest rate adjustment that is 4% higher than the old one.
Borrowing money to buy a house is considered a consumer loan by banks, so the interest rate will be quite high. So before buying a house with installment payment, you need to consider and discuss it carefully with your parents, spouse. At the same time, grasp the fluctuation of interest rates in the following years in the credit currency to be proactive in all situations!
+ Buy a house with installment payments that suit your ability
+ Flexible in terms of revenue
With the pressure of debt to the bank, you should not passively wait for your monthly salary, but be proactive and flexible about your income. In case you have to leave your job unexpectedly, the company cannot pay your salary on time, etc., you also have an account to pay off the debt with the bank. Avoid old debt pile new debt.
+ Note about the penalty interest rate when overdue and before due
If you decide to borrow money to buy a house, you need to pay special attention to this issue. Because life is unpredictable. If you can’t pay on time, how will the bank’s penalty be? In fact, the early repayment penalty policy of banks is different. Therefore, before deciding to borrow money, you should read the terms and conditions carefully.
Even if you pay your debt early, you will be fined quite heavily from 1-3%. Although when borrowing money to buy a house, there will be advice to repay the loan as soon as possible. But you should also be aware of this. Avoid losing money because of fines falling from the sky.
What are the documents required for home loan approval?
The documents that customers prepare when taking out a home loan are the basis for the bank to approve and decide to disburse or not. In order for your application to be approved quickly and not be rejected, you need to prepare the following documents:
- Loan application form cum loan repayment plan according to the form of the bank;
- Marriage certificate or certificate of singleness;
- Customer’s ID card, household registration book/temporary residence book;
- Documents related to houses and residential land to be purchased, built or repaired;
- Documents proving the source of income to repay the debt;
- Documents related to collateral.
Above is our share about the form of mortgage loan to buy a house. Hope this information will help you better understand this form of consumer loan. Don’t forget to follow the next share of Aequitas Audit.
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