What are the Benefits of Getting a Home Loan?
Purchasing a new home or constructing a dream home is a significant milestone for many people, and with home loans, the goal is attainable. Not just this, Home Loans come with several other benefits, let’s find out what they are. Read on to learn more.
Top 5 Benefits of Taking a Home Loan
1. A Home Loan Makes You Eligible for Housing Loan Tax Benefits
The Indian Government follows the slab system for income tax. Citizens of India must pay taxes based on the amount they earn. The tax rates vary from 5% to 30%. Individuals earning higher, pay higher taxes, and individuals belonging to the lower income groups are made to pay nominal taxes. However, if you earn more than Rs.2,50,000 in a year, you must pay taxes to the government of India.
The Government of India also offers its citizens tax benefits under the old tax regime, using which borrowers can save on their yearly tax payout. Home Loan tax benefits help borrowers save a considerable amount of money. Under Section 80C of the Income Tax Act, Home Loan borrowers can claim tax benefits up to Rs.1.5 Lakh on payments made towards the repayment of the principal component of their Home Loan. Under Section 24b, they can claim home loan tax benefits up to a maximum of Rs.2 Lakh on the repayment of the interest component of their housing loan. Over and above this, one can also claim an additional Rs.50,000 under Section 80EE and Rs.1.5 Lakh under Section 80EEA. However, to be eligible to claim Home Loan tax benefits under these sections, one must meet certain qualifying criteria.
However, when a homebuyer pays for a home through cash or their savings, they are not eligible for any Home Loan tax benefits and therefore, lose out on savings.
2. A Home Loan Also Helps Home Buyers Stay Liquid
Life is unpredictable. We go about life thinking it will always go as planned. However, life throws curveballs at us and when it does, sometimes, all our planning goes to waste. We live in highly fickle times – there might be a financial emergency anytime. Many of us find ourselves being compelled to deal with a medical emergency. Home Loans allow homebuyers to keep their savings safe for a rainy day. Thus, people planning to buy a home must get home loans instead of dipping into their savings. Home Loans help homebuyers stay liquid and well-prepared for a life emergency.
The truth is when faced with adversity, the only thing that brings us comfort is knowing we have enough money to help us wade through the tough times.
3. A Home Loan Will Help You Reduce Your Chances of Getting Scammed
Homebuyers may get scammed. Instead of investing in ready-to-move-in homes, many individuals invest in upcoming projects to save money. However, sometimes, these upcoming projects get shelved or delayed, causing the buyer significant monetary loss. When a borrower applies for a Home Loan, the lender they apply to does not sanction the loan amount without carrying out proper due diligence. Lenders hire experts not only to verify all the property papers from a legal point of view but also to check the property you are investing in from a technical point of view. Lenders do this to ensure the safety of their money as well as that of yours. Thus, if you are planning to buy a home, you can opt to apply for a Home Loan.
4. A Home Loan Helps You Improve Your Credit Score
These days, most people need access to credit. Whether you plan on buying a car or need money to fund the education of your child, you will need access to credit. Lenders have strict qualifying criteria for all kinds of loans and only those borrowers who meet these qualifying criteria get approved for a loan. One of the key factors that affect loan eligibility is the credit score. A credit score is a three-digit number between 300 and 900. It is important because it depicts a borrower’s repayment capacity.
Lenders ask for a credit score above 750 as such a credit score reflects excellent creditworthiness and repayment capacity. If you have availed yourself of a Home Loan and regularly pay your EMIs before the due date each month, your credit score will automatically improve.
5. A Home Loan Allows You to Save for Other Expenses
Home Loans are low-interest rates and long-tenor loans. Since Home Loans are secured by collateral, lenders charge a comparatively lesser rate of interest on these loans. Home Loan allows homebuyers to pay for their home in a convenient and stress-free manner keeping their monthly budget in mind. Thus, it also allows homebuyers to not compromise on their daily needs and desires.
What are the Benefits of Getting a Home Loan?
A Home Loan offers several benefits. However, it is a secured form of financing. The property bought with the Home Loan money serves as collateral in the case of these loans. Therefore, borrowers must avail themselves of a Home Loan after careful planning and choose the loan amount wisely they wish to borrow. A Home Loan EMI Calculator can prove helpful in this regard. An EMI calculator is an online handy tool that borrowers can use to figure out the right combination of principal and loan tenor for them based on the EMIs they can easily pay each month.
Read Also: Tax Benefits on a Second Home Loan
