Credit Dharma Home Loan Glossary

A Top-up Loan is an additional borrowing option for existing home loan borrowers in India, allowing them to access extra funds for various purposes with simplified documentation and competitive interest rates.

EMI, or Equated Monthly Installment, is a fixed payment amount that borrowers pay to lenders every month, comprising both the principal amount and interest, ensuring structured repayment of loans over a specified period.

A fixed interest rate remains constant throughout the loan tenure, providing borrowers with predictability and stability in their monthly repayments, regardless of market fluctuations.

The interest rate is the percentage charged by lenders for borrowing money, influencing the total cost of a loan and directly impacting borrower’s monthly payments, with rates varying based on market conditions, loan type, and individual creditworthiness.

A floating interest rate, also known as a variable interest rate, fluctuates based on market conditions in India, potentially leading to changes in borrowers' monthly loan payments and offering flexibility but also uncertainty in the long-term cost of borrowing.

The Debt-to-Income (DTI) ratio, is a financial metric comparing an individual's monthly debt payments to their gross monthly income, helping lenders assess the borrower's ability to manage additional loan payments responsibly and make informed lending decisions.

A down payment is an initial upfront payment made by the, usually a percentage of the property's purchase price, reducing the amount of the loan needed and demonstrating the buyer's commitment to the purchase.

Disbursement refers to the release of funds by lenders to the borrower, for loans or other financial arrangements, following the fulfillment of specified conditions, enabling the borrower to access the approved funds for their intended purpose.

Processing Fees are charges imposed by lenders to cover the costs associated with processing a loan application, including administrative expenses, document verification, credit checks, and other processing tasks, ensuring timely processing of the loan request.

Foreclosure is the legal process through which a lender in real estate can repossess and sell a property when the borrower fails to meet the agreed-upon mortgage payments, allowing the lender to recover the outstanding balance or the property itself to satisfy the debt.

The Loan to Value (LTV) Ratio is a financial term used by lenders to evaluate the percentage of the property's value that is being financed, where a lower LTV typically indicates less risk for the lender. This ratio helps in determining the level of equity in the property and influences the terms of the loan, such as interest rates and required insurance.

Prepayment refers to the act of repaying a part or the full outstanding loan amount before the scheduled due date. This initiative can help borrowers reduce their interest burden and shorten the overall loan tenure, potentially leading to substantial cost savings over time.

The CIBIL score is a 3-digit numerical representation of an individual's creditworthiness in India, directly influencing their ability to obtain loans and favorable interest rates from lenders based on their credit history, repayment behavior, and credit usage.

The credit score reflects an individual's creditworthiness and is based on their credit history, repayment behavior, and credit utilization. A higher score increases the likelihood of loan approval and favorable terms from lenders.

Prepayment charges in India are fees levied by lenders when borrowers pay off part or all of the outstanding loan amount before the scheduled due date, typically calculated as a percentage of the prepaid principal to compensate for potential lost interest income.

An overdraft facility in India lets you spend more than what's in your account, like a backup line of credit, useful for managing urgent expenses or temporary cash shortfalls.

Another person applying for the loan with the primary applicant, potentially improving eligibility.

A government scheme aimed at providing affordable housing to the urban and rural poor by offering them interest subsidies on home loans.

A Home Loan balance transfer is a credit facility in which your existing balance is transferred to a new lender.

Section 80C of the Income Tax Act in India allows taxpayers to claim deductions on investments and expenses, reducing taxable income and encouraging long-term savings.

Under Section 24B of the Income Tax Act in India, individuals can claim deductions on the interest paid on a home loan for a self-occupied property, with a maximum deduction limit of INR 2 lakh per financial year.

An Adjustable Rate Mortgage (ARM) is a home loan with an interest rate that adjusts periodically, based on prevailing economic conditions, introducing potential changes to monthly mortgage payments, and offering flexibility but also uncertainty in long-term borrowing costs.

Interest Payable refers to the total amount of interest that a borrower is obligated to pay on a loan or financial arrangement over a specified period, typically calculated based on the original loan amount and the interest rate.

Tenure refers to the period or duration over which a loan or financial arrangement is scheduled to be repaid, specifying the number of months or years within which the borrower is required to complete the repayment of the entire loan amount, including the principal and interest.

The Base Rate is the minimum interest rate set by banks for lending to creditworthy borrowers in India, acting as a benchmark rate that determines the interest rates on various loans offered to customers. It serves as a reference point for pricing other interest rates in the financial market.

The margin on a loan shows how much extra value the property has compared to the loan amount, reassuring the lender and safeguarding the investment. It mirrors the personal stake in an investment, contributing to potential earnings growth and increased risk.

Security, in the context of loans, pertains to the assets offered by borrowers as collateral to lenders, providing a guarantee of repayment and mitigating the lender's risk. This collateral can be seized by the lender in the event of default to recover the outstanding loan amount.

Principal, in the context of loans, refers to the original amount of money borrowed, which does not include interest or additional fees. It represents the initial sum that the borrower is obligated to repay to the lender over a specified period, typically through regular installment payments.

Outstanding balance refers to the remaining amount of principal and interest owed on a loan at a specific point in time, reflecting the total sum yet to be repaid by the borrower to the lender.

Home loan conversion allows borrowers to switch from a floating interest rate to a fixed one or vice versa, providing flexibility to adapt to changing market conditions and interest rate scenarios, contributing to effective financial management for borrowers in India.

Additional interest is extra charges on overdue payments, increasing total repayment in India.

Incidental charges are unexpected fees for non-routine services, affecting overall transaction cost in India.

Principal adjustment reduces the loan's original amount over time, adjusting the outstanding balance in India.

Interest adjustment recalculates interest payments based on changes in loan terms or payment schedules in India.

Pre-EMI involves interest-only payments before the full equated monthly installment (EMI) starts, easing initial financial strain in India.

Provisional interest is a temporary estimation of interest charges, subject to change based on finalized loan terms in India.

The fees paid to the new lender to process the new home loan