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Posted Date: Dec 10 2020   |   Posted By : DCNPL

7 Reasons to Opt for Home Loans

To own a house in a city is a pride feeling and gives immense satisfaction. Investors buy property as a long term investment; some people buy it to generate income out of it by giving it on rent. But ultimately either an investor or a common man everyone dreams of having their own home. 

People avoid buying a property because of financial issues. They have a misconception that loan is not beneficial and many people consider it as a headache. There are so many myths about loans that some people are ready to pay a fixed amount of rent rather than paying monthly instalments. We often hear misbelief statements about loans like it increases financial burden, it includes lots of paperwork, fixed amounts as monthly instalments must be paid every month or they will charge heavy fines and whatnot. But in reality, it is not an entire truth.

Every coin has two sides similarly; loans have their advantages, especially home loans. Prevailing economic conditions and policies encourage buyers, especially end-users to buy a home. Opting for a home loan is an ideal decision; even those who have enough money to buy a home go for a home loan.

7 Reasons to go for home loans 

Banks and Non-Banking Financial Companies (NBFC) provide home loans, once you are proved eligible according to terms and conditions.

  • Benefits of floating rate home loans – The main benefit of having a floating rate home loan is that they are cheaper than fixed-rate home loans. Sometimes floating rates cross fixed rates but that is for a very short period. Fall in interest rate can decrease the amount of total interest payable. Another benefit of taking a floating rate home loan is that you don’t have to pay a fine on pre-payment to any of the banks or NBFCs.

  • Cheaper borrowing – Home loans are secured personal loans that are why they have a low rate of interest. These loans are cheap because they are secured, and secured loans are less risky and there is the least probability that it will turn into NPA for banks. Another reason is that banks can always get some amount out of it by selling it in an auction.

  •  Tax benefit –According to Indian Income Tax Act 1961, under Section 80C, an individual is allowed to have tax deduction on the amount paid as principal of home loans; up to amount 1.50 Lac one can claim a tax deduction. Because of this benefit the people who don’t need to go for a loan for having a property, take home loans.

  • Due diligence by banks or NBFCs – Banks and NBFCs before passing a loan verify the documents of the property carefully and make sure that the property is legal this process is called due diligence in terms of the law. As it is a kind of mortgage against loans for banks. Eventually, it reduces your work to go through all these things to make sure your property is legal.

  • Good opportunity to increase wealth – As home loans is the cheap borrowings then instead of blocking money by spending to purchase a property; you can invest your money in securities or in any other way that has a high rate of return. But one should keep in mind that a return rate of investment should be higher than the interest rate at which you took a loan.

  • Liquidity –Purchasing property needs lots of money. So instead of blocking it for the long term, and making your financial stability rigid. By taking loans you can always maintain a liquidate position and can use your money for short term investments. Also, it is important to maintain liquidate position due to uncertain probabilities which may occur.

  • Increase credit score – When you pay your monthly instalments against a loan at a given time. It increases the credit score that helps you to acquire a loan easily in future. This is the reason that people who have enough money to invest in property go for loans to improve their credit score, which might be helpful in future. Not only that, but good credit scores also provided many benefits.

While deciding whether you should take a home loan or not, you need to consider many factors such as income, family size, age and other liabilities to avoid having any kind of mental stress about loans.

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