Home loans Driving Growth in Smaller Towns
According to an article published in the Times of India, outstanding home loans witnessed a growth of 9.6% to touch a valuation of Rs.22.3 lakh crore in the initial nine months of FY21. The article states that more individuals purchased homes in smaller towns resulting in the tier-2 and tier-3 centres posting the highest growth figures for this credit instrument. The wide array of benefits of a home loan forms a major reason for individuals applying for it.
This article illustrates various vital benefits that might be possibly driving individuals from smaller towns to acquire this credit instrument.
What are the benefits of a home loan?
Illustrated below are the various benefits that individuals will get on acquiring a home loan:
- Getting tax benefits
A housing loan makes a borrower eligible for several tax benefits that can help them save substantial funds. As per Section 80C of the Income Tax Act 1961, tax deductions are allowed on principal repayments amounting up to Rs.1 lakh made on a home loan acquired for residential property.
Borrowers can also get tax deductions of up to Rs.1.5 lakh on the home loan interest payments they make. The processing fees paid while applying for this credit instrument is treated as interest. This implies that it can be deducted from the taxable income.
This forms a major reason to opt for a housing loan instead of self-funding the purchase.
2. Rapid capital appreciation
Given the huge demand for housing, investment in India’s real estate sector can prove to be lucrative in the long run. The costs of construction and rents have been on the rise lately, and this trend will most probably continue going forward. Therefore, opting for a home loan at a suitable interest rate to own a house can prove to be an excellent decision as it is an asset whose value can only appreciate.
Having mentioned that, individuals must use a home loan calculator before applying so that they can manage the repayment efficiently.
3. Choosing a suitable interest rate
Individuals can acquire a housing loan at either a floating or a fixed rate of interest. A floating interest rate can fluctuate as per the prevailing market scenario. On the other hand, a fixed rate of interest is set at a particular value while acquiring the loan and remains the same throughout the repayment tenor.
Thus, applicants can choose the type of interest rate that will benefit them in the long run. However, they should use a home loan interest rate calculator prior to making the final decision. Additionally, individuals must take note of the various factors that impact the home loan interest rate.
2. Flexible repayment schedule
A home loan comes with a long repayment period. This enables borrowers to plan their repayment comfortably over the extended tenor. Borrowers can opt to settle their credit before the end of the tenor by making a substantial prepayment. However, individuals must note that the concerned financial institution may levy prepayment charges.
Prospective home loan applicants must choose a reputed financial institution offering the best home loan interest rate. Selecting a renowned lender will allow them to benefit from several offers. These include several pre-approved offers extended on both secured and unsecured financial products. These offers help simplify and accelerate the lending process. Individuals can check their pre-approved offers by providing a few details, such as their names and contact numbers.
Applicants must also keep in mind the eligibility criteria and a list of all the documents required to acquire a home loan. After acquiring the credit, individuals must be responsible for their repayment so that their credit history is not affected. Using a home loan EMI calculator prior to loan application will prove to be helpful in this regard.
Additional Read: Search for the Best Home Loans in Bangalore ends here
Thus, individuals who want to own a house must keep in mind the above-mentioned details related to a home loan.