“Food, clothing, shelter” defines the quality of life. Though placed at last among the three, Indians share a mutual dream – to own a home one day. But with the graph of property prices not seeming to descend, buyers are often at a distance from achieving the dream.
This is when, with its many advantages, the home loan comes into play.
But why should I go for a home loan?
This is one question that lingers in the mind of every middle-class man. A loan is a liability that burdens you with monthly cash payments for quite a tenure. However, the benefits aren’t something to be overlooked.
- Tax perks: There are various tax benefits one enjoys with a home loan. Not only is the interest to be paid deductible, but earning a rebate towards principal repayment is always possible.
- Maintains liquidity: Indians struggle to save for future goals. For an average Indian, it’s barely possible to buy a home with savings. The home loan appears as a friend here – sparing a good fraction of savings for emergency purposes, giving you the freedom to choose a suitable EMI.
Where can I get a home loan?
When choosing a home loan, one should go for the one that approves the loan quickly, is less troublesome in terms of documentation, and is cheaper. There are 3 major sources along with their features –
- Public Sector Banks: Home Loans from public sector banks have numerous advantages. Firstly, it was cheap! The charges for loan processing are less. When asking for a big amount, processing charges are high and heavy on the pocket. Moreover, the interest charged by public sector banks is much lower as compared to other sources, plus you don’t have to bear a prepayment charge. But a downside – it’s time-consuming. If saving money on a loan is your priority, a loan from a public sector bank is the one for you.
- Private Banks: This is the choice for you if you’re flexible in terms of expenditure. Loans from private banks get approved quickly, they’re service-oriented, and you enjoy the benefits of digitization! However, it’s not too budget-friendly. Though home loan interest rates can be pretty high, this can be the one for you if you believe “Time is money.”
- Non-Banking Financial Companies (NBFCs): Though they don’t hold an official banking license, they do the job efficiently. The home loan interest rates are low, it’s quick, and one can go through the application process smoothly without trouble. To sum it up, NBFCs are the best option to avail of a home loan.
How much can I borrow on a home loan?
Home loan eligibility depends a lot on your credit score. Depending on your credit record and the type of home loan you choose to avail of, banks accredit around 80-85% of the property price. The duration can range from 5 years to 30 years. You have the freedom to choose the type of home loan interest rate – a fixed home loan interest rate, meaning you pay the same amount as interest for the entire duration, or you can play smart by opting for a floating home loan interest rate to make the most out of falling interest rates. You can always go for a combination of both too. If you go for lower EMI, tenure is long, and if you want short tenure, you bear higher EMIs.
Before availing of a loan, weigh the loan against your financial standing and choose the one that outweighs the former.