What is a home loan?
A home loan is quite simply a credit that is given to individuals to buy, construct or renovate a residential property. Many times it is seen that people do not have all the cash that is required to purchase a home or probably to build a home. In such situations, home loans come in handy. Home loans can be repaid through convenient EMIs over a long period of time. Home loans given to an individual typically range at around 5 times his/her annual income. So if a person earns 8 lakhs per annum, he/she would be eligible for 40 lakhs home loan.
Here are some of the benefits of having a home loan:
Since an average individual cannot accumulate enough funds to buy a house, it becomes an obvious choice to go for home loans.
For those who stay in a rented accommodation, it is better suggested to buy a house where in they could save the burden of paying rent and that money can now go for EMIs for the home loan which you have taken. At the end, the house becomes yours.
There are a whole lot of benefits that the Income Tax department offers to people repaying home loans in terms of rebates and exemptions.
Some advantages of home loans as compared to other types of loans
The repayment duration for a home loan will be long spanning upto 20 years.
The interest rate for home loans is lower than other loans.
Repayment of home loans is eligible for tax exemptions.
In the market today, there are also fixed rate, floating rate and adjustable rate home loans available. People can opt for either of them based on their current financial situation and their ways of repaying the loan.
There is no pre-payment penalty. Meaning, at the beginning of your home loan re-payment, you will be paying more of interest than the principal itself. In general, it is a good idea to bring down the principal by prepaying as fast as possible.