General terms used in loan section of Bank

Almost all of us, may have gone to the bank or some will go in future, to apply for particular loan. The bank representative gives us all the documents depending upon type of loan but many terms in these documents can not be understood by common people. Even people who are not in banking sector doesn't know the meaning of these terms and this leads to a lots of confusion. To avoid this please remember the meaning of these terms.

1. What is EMI?

EMI stands for Equated monthly installments. It is the amount which is payable to the bank every month. Depending upon your loan amount and tenure the bank will divide the final amount in small equal installments, which is called EMI. There are some rules that are to be followed while paying your monthly EMI. You should pay your monthly EMI on time to avoid any penalty fees.

2. What is floating rate loan?

Floating rate loan means that the interest rate on your loan is not fixed and is subject to change The bank may increase or decrease the interest rate depending upon many factors such as financial condition of bank, guidelines issued by governments etc. It depends upon your financial condition and also economical condition of country. If economical condition of country is strong, and chances of remaining it stable are high then you can choose this option. Stable economic condition means banks have good amount of money and they don't need to collect money from other sources to compensate their loss.

3. What is fixed rate loan?

Fixed rate loan means the interest rate loan on your loan will not be changed during its period. According to me it is better option to choose because your interest will not increased in case of any financial problems of bank. If you choose this option then your EMI will be maintained same throughout the loan period, except some critical conditions.

4. What is NMI?

NMI stands for net monthly income. Normally it refers to your total monthly income after taxes. Your NMI is taken account by the bank to decide your loan credibility. If your NMI is greater then you may get more loan amount from the bank.

5. What is NAI?

NAI stands for net annual income. It is your total annual income after taxes. NAI is also used to calculate your loan credibility by some banks in addition with NMI.

6. What is GMI?

GMI stands for gross monthly income. It is your monthly income without considering the amount of tax that is payable by you. It may be simply your total monthly income.

7. What is GAI?

GAI stands for gross annual income. It is same as GMI but on annual basis. It is your total annual income without considering the amount of tax that is payable by you. GAI may be simply regarded as your total annual income.

8. What is margin?

Margin is another important term used by banks. It is also called down payment. Normally bank gives up to 80% of your total value of home or car as loan. Remaining amount is supposed to payable by you, is know as margin, in banking terminology.

These simple and normal terms used by banks's loan section. These terms may confuse the customer as they don't know the meaning. Also without knowing these terms you may do some mistakes which may affect youe financial condition also. So it is better to understand what are you doing clearly before applying for loan.

How to apply for home loan in India?

Loan Application