Let’s say, you have a dream to buy a house, but not just any house though, we are talking about the cozy dream house. But that would cost you a lot, especially considering the property rates in India right now. That would be tough, right? Not so much, especially with the home loans. But yeah, like everybody else who finds out about home loans, you might also be wondering whether or not there is a catch with this whole home loan thing, correct? Well, that is what we are gonna find out today in the post where we will be taking a good look at the possible home loan advantages and disadvantages. Alright, here we go.
Advantages of Taking Home Loan
Off to the positive side of things, let’s go:
1. Incredible Tax Benefits
Can you believe the biggest plus of getting a home loan is the tax advantage? Under Section 80C of the Income Tax Act, you can claim deductions up to Rs 1.5 lakh every year on the principal amount you repay. And thanks to Section 24B, you’re also able to knock off up to Rs 2 lakh on the interest you pay. These tax deductions are a real deal-maker, seriously slashing your taxable income, which means, you guessed it, more savings for you.
2. Easy On Your Wallet
Think about this for a second: home loans are turning the dream of owning a house into reality for many. How’s that, you ask? By covering as much as 80% of your property’s cost, they fill the big gap between your savings and the actual price of the property. This translates to your dream home not being just a pipe dream anymore, but something totally achievable.
3. Repayment Made Easy
Here’s a little-known fact: home loans offer the lengthiest repayment terms compared to other loans, stretching up to 30 years! This awesome flexibility means you can manage your monthly budget without any pressure. Choose smaller, easy-to-handle EMIs and you’ll be good for the most part.
4. The Value Only Goes Up!
Let’s shift gears to the big picture. Investing in real estate? It’s almost always a winning bet. Property values generally shoot up over time, often surpassing the total interest you pay on your home loan. What’s in it for you though? A solid gain in the long run. Buying property isn’t just about securing a place to live; it’s a smartly laid out financial strategy too.
5. No More Rent Hassles
Just imagine, once you own your home, the monthly stress of rent payments is a thing of the past. Instead of rent, your EMI payments gradually build your equity in the property which sounds way more beneficial, doesn’t it? Paying rent is essentially money out the window, with no lasting benefit.
6. Easy Peasy Lender Switch
Now, here’s an interesting aspect of home loans: they offer you the flexibility to switch lenders. Found a lender offering a better deal with lower interest rates? You can easily make the switch, lightening your financial burden significantly. That’s pretty convenient, right?
7. Your Credit Score Gets a Boost
Keeping up with your home loan repayments on time is a smart move for your credit score. It’s a double advantage, you’re on your way to full home ownership, and simultaneously, you’re boosting your creditworthiness. Perfect for when you might need a loan down the line. Isn’t that a strategic financial move?
Disadvantages of Taking Home Loan
Alright, now let’s take a look at the catch, or catches with this whole home loan thing, ready?
1. The Extended Journey of Home Loans
Can you believe it, when you opt for a home loan, it’s like signing up for a marathon that goes on for years, maybe even decades! Think about it, all that time, you’re hooked to this loan, and this might just tie your hands when you want to invest in something else. It’s no small thing, right?
2. That Interest Rate, Though!
And let’s talk about the interest over the entire period of your home loan. It’s mind-blowing, sometimes even more than what you initially borrowed! Doesn’t seem quite fair, does it? If that’s a bit too much for your taste, maybe stepping back from a home loan could be the way to go, at least for the moment.
3. Property Values
Have you ever noticed how the property market swings like a pendulum? The highs and lows are unpredictable. You’re taking a gamble that your property’s value will soar, but hey, it could also take a dive. It’s a bit of a risky deal, isn’t it?
4. Missing Out on Alternative Investment Opportunities
You see, the cash you’re putting into paying off your home loan? It could be making you a pretty penny in some other investment. It’s like missing a golden opportunity, one that could lead to a more profitable destination. Something to think about, for sure.
5. Affects Other Financial Aspirations
When you decide to go for a home loan, it’s not just about the monthly payments. You see, this commitment can seriously affect your ability to funnel funds into other important life objectives. We’re talking about essential goals like furthering your education, planning for a relaxed retirement, or maybe even kick-starting your own business venture.
6. The Risk of Losing Your Property
Now, let’s not sugarcoat this; failing to keep up with your loan repayments is a big deal. It’s not just about falling behind on payments; it can escalate to legal complications. The worst part? You might end up losing your home. It’s a risk that’s real and, honestly, something to think seriously about before signing on that dotted line.
7. Saying Goodbye to HRA Tax Benefits
Here’s something salaried individuals need to think over. If you’re used to getting House Rent Allowance (HRA) benefits, owning a house changes the game. Once you move from being a renter to an owner, those sweet HRA tax savings? Well, they become a thing of the past. For some, this shift can have quite an impact on their tax-saving strategies.
Home Loan FAQs
Q1. How Long Can A House Loan Be In India?
Ans: In India, you can stretch a house loan up to 30 years, offering a relaxed repayment timeline and typically lower interest rates. For shorter commitments, there are options under 5 years too.
Q2. How Many Times A Person Can Take Home Loan In India?
Ans: You’ll be quite surprised to know that there is actually no limit on the number of home loans you can have in India. This means you can take out several loans from different lenders, perfect for investing in multiple properties.
Q3. What Happens If Home Loan Is Not Paid In India?
Ans: See, the equation is pretty simple with home loans in India, if you don’t pay your home loan for six months, banks usually give a two-month grace period. Fail to pay after that, and your loan becomes a non-performing asset, giving the bank the right to sell your property to recover debts.
Q4. Can You Take Two Loans On The Same Property?
Ans: No, you can’t take two loans on the same property. The reason is simple though: a property can only serve as collateral for one loan. But, there’s a workaround. Two individuals can jointly apply for a single loan on that same property.
Q5. What Is The Full Form Of NPA?
Ans: NPA means Non-Performing Asset. It’s basically a loan or advance where the principal or interest hasn’t been paid for over 90 days. To give you a clearer picture, banks categorize NPAs into three types: Substandard, Doubtful, and Loss assets.
Overall, India’s home loan market is doing really well. This is mainly because people’s incomes are going up, more and more folks are moving to cities, and the government has introduced some helpful schemes.
- Different Types of Loans Available in India
- Personal Loan Vs Home Loan
- Gold Loan Vs Personal Loan
- Demand Loan Vs Term Loan
Anantha Nageswaran is the chief editor and writer at TheBusinessBlaze.com. He specialises in business, finance, insurance, loan investment topics. With a strong background in business-finance and a passion for demystifying complex concepts, Anantha brings a unique perspective to his writing.