4 Challenges Faced while Applying for Housing Loan in India

Housing or home loan is perhaps the most manageable loan to avail in India. It is also the most popular, not without any reason, though. Home loans provide the longest tenure, thirty years to be precise. Also, the interest rates are lower than most other loans in India. 

However, despite so many benefits of home loans, borrowers still face some predictable challenges while applying for home loans in the country. 

This article discusses the top-4 issues borrowers face while applying for housing loans. 

The Top-4 Issues Borrowers Face While Availing of Housing Loans in India

The following is a comprehensive list of the top-4 predictable issues people face while applying for home loans:  

Choosing the Correct Interest Type

Depending on the loan amount, the interest type can help you save a hefty sum or lose quite a bit. Home loan interest rates may be floating or fixed. Fixed-rate loans remain unchanged throughout the loan term. 

So, if you opt for a fixed-rate loan, your EMI or interest rate will not be subject to interest rate fluctuations. A fixed-rate loan works best when the interest rates show an increasing trend.    

Conversely, a floating-rate loan is best suited for a declining interest rate scenario. If you feel that the government is going to reduce the interest rates further, it is prudent to opt for a floating-rate loan since you can save a considerable amount this way. 

So, choosing the right interest rate type is crucial to making the right decision while applying for a home loan. 

Staying Ahead Through Credit Score

The credit score speaks volumes about a borrower’s credibility. If your credit score is high and your credit profile decent, lenders will consider you a valuable borrower. In contrast, lenders may increase interest rates to minimise their credit risks if your credit score is below 750. 

The home loan interest rate is calculated by adding a spread on the prevailing MCLR or Marginal Cost of Lending Rate. The spread depends on the credit score. So, if your credit score is high, the spread will be more affordable, and so will the interest rates. 

Hence, before applying for a home loan, you must check your credit score and improve it by clearing off your dues. 

Factor in the Fees

When you avail of a housing loan, you have to pay a processing fee. The processing fee might be between 0.50% and 1% of the loan amount. In addition, there is a mandatory down payment, which is a minimum of 10% of the actual loan amount. 

Furthermore, a homebuyer needs to pay stamp duty, registration fee, etc., to get the property’s possession.

Remember, the processing fee is non-refundable. So, if the lender rejects your application, you cannot claim the amount. Moreover, every time a loan application gets rejected, the credit score takes a hit. 

Hence, it is wise to evaluate your loan eligibility before applying for a home loan.

You can always use a free home loan eligibility calculator to check your eligibility for a loan before applying.

Keep the Documents in Order

Availing of a home loan is a document-intensive process. Lenders scan all documents carefully to eliminate the chances of the loan becoming a Non-Performing Asset or NPA. 

The documents you need to submit include age and address proof, income proof, property documents, etc. 

Also, ensure to fill out the application form correctly since any false information in the form will lead to a rejection of the loan application.


Home loans are the most convenient loan to avail in India. It is very popular, and for a good reason, but it also has its issues. The four challenges mentioned in this article are the most commonly faced issues by borrowers. So care for these tips to stay ahead in the application and approval process.

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