Wit the rising prices of real estate, buying a home can be quite strenuous financially for an individual. But with financial institutions providing loan products like a home loan, the purchase of a home becomes easy for an individual. In a home loan, the individual will be provided with the loan amount for the purchase of a home by a financial institution or a NBFC (non-banking financial company) for helping them purchase a home of their dreams. Home loans are a secure type of loan, that means a customer will have to provide an asset to a financial institution as collateral for a home loan to get approved. The collateral is provided as a type of security to the bank and will be in possession of a financial institution until the repayment of the loan is completed. The financial institution has the authority to seize the collateral or auction it off, if a customer fails to complete the payments which were established during the sanctioning of the housing loan.
In a home loan, the financial institution will use a customer’s property as collateral to secure the loan. As a home loan is a secured loan, the interest rates offered on them are comparatively low than the interest rate of an unsecured loan, like a personal loan. Amount of a home loan varies depending on the income and credit history of a customer. Customers can also apply for a home loan, jointly with their spouse or other family members as co-applicants.
5 advantages of opting for a home loan are:
1. No more stress of rent:
With the price of real estate skyrocketing, the rents offered to a customer also goes up that does not make it a viable option as it starts affecting an individual’s monthly budget. Hence it is always better to make the payments though EMIs and own the house.
2. High repayment tenure:
Out of all other types of loans, a home loan has the longest repayment tenure that can easily go up to 30 years, so if a customer wishes to, they can reduce the burden of equated monthly instalments by extending the tenure.
3. Easy to buy dream home:
For a lot of citizens of this country, purchasing a home with their own money does not seem possible. A home loan helps in making this dream come true, with their policy of making the payments through monthly instalments.
4. Tax benefits:
In an attempt to motivate the customers to purchase their own home, the government of India provides tax deduction on the principal as well as the interest paid on the home loan. The deductions under income tax begins only after the house has been completely constructed. A customer will not be able to claim tax deductions while the property is under construction.
5. No prepayment charges:
When a customer wants to make the payment of a loan before a given date, there are some prepayment charges which are associated with them for other types of loans, whereas in a home loan, there are no prepayment charges or penalties.