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FINANCING BY BANKS AND HOME LOAN
Financing: Lending of fund to the constituents, mainly individuals, traders, business and industrial enterprises, constitutes the main business of the banking company. The major portion of a Bank Fund is employed by way of loans, which is the most profitable employment of its fund. The major part of bank is earned from interest. The business of lending nevertheless is not without certain inherit risks largely depending on the borrowed funds, a banker therefore follow a very caution policy, and conduct his business on the basis of safety, liquidity, profitability etc.
MEANING: under the loans, credit is given for a definite purpose and for a predetermined period. Normally these loans are repayable in installment. Funds are required for single non-repetitive transactions and are withdrawn only once. If the borrower need funds again or wants renewal of an existing loan, a fresh request is made to bank.
TYPES OF LOANS:
Bank loans can be defined as under:
These loans are provided for a short period (less than 1 year) granted on the basis of securities like tangible assets (movable assets like goods and commodities) .From April 1995. RBI made it mandatory for the banks to provide a part of bank credit to big customer in the form of loans..
These loans are provided for more than 1 year and are provided for the need of capital asset and for new establishment of business or expansion of existing one. Bank takes fixed assets as a guarantee for these loans.
These loans are given to those individuals who want to buy land for the purpose of building house or want to construct one within a specified period of time defined by bank. Or it can be said that it is the combination of land loan or construction loan.
These are loans are for individuals for their purpose. There are four type of retail loan:
Advantage of loans:
Can make expensive purchase
Better rates of interest.
Sufficient time to pay back.
Strict requirement of collateral or security.
Burden of repayment.
Irregular Interest rates in case of changes in market rates.
Composite scheme: To build a house is the most important decision for any person and it require lots of finance and financial assistance Building a home is one of the most important decision that a person will make and it can consider and life style and financial circumstances.
Tax benefits are of the advantage of taking home loan.
Purpose of loan
Construction of a House.
Purchase of a House.
Extension or modification of an existing of House.
Land purchase cum construction.
Repair and Renovation: It is maximum of Rs. 30 lakhs for 5 to 10 years.
Purchase of Plot: Bank provides 85% of the cost of plot and takes Interest of 1% higher than normal interest rate. Bank gives maximum of 25 lakhs for 2 years time period.
Eligibility for Home Loans
Any Indian citizens who have sufficient repayment capacity to the loan applied can apply for loan.
The applicant should be less than 21 year at the time of applying of loan
The applicant should not exceed 65 years during the loan tenure.
Any Indian citizen who is a non residential and hold a valid Indian passport can apply for home lone under the NRI scheme.
NRI may be required to show a guarantor residing in India
The applicant should be more then 25 years.
The individual should be of salaried class.
The applicant need to provide security may be mutually agreed.
Documents required: the Indicative list is given below:
In case of Residential Indian
In case of Non-Residential Indian
Signed passport size photographs of all the application
Details of other income
Copy of passport, Visa, Labor and ID card
Photocopy of documents of title
Copy of work permit (if applicable)
Documents pertaining to saving and assets
Copy of CDC in case of customer working in merchant navy
Details of other loan taken
Bank statement for last 6 month both domestic and International
General power of attorney as per Ban’s drafts duly attested by the Indian consulate in case of not in India
Signed passport size photographs of all the applications
If the NRI is Indian then the POA can be locally notarized
Cheque of processing fees-0.2% loan amount applied for
Copy of appointment latter and contact (translated to English and attested)
Any other document as required by bank
Salary certificate (in English) specifying name date of joining designation and salary
Bank statement for last 6 month
Photocopies of Title deeds.
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