What is a Home Loan?
A home loan is an amount of money that an individual borrows from a bank, financial institution or from a Non Banking Finance Company at a certain rate of interest. It has to be repaid in shape of an EMI ( Equated Monthly Installment which is combination of certain principal and interest amount ) every month. The property on which loan is taken to be kept as a security by the money lending company for the Home Loan.
Why Home Loan?
Buying a home could be one of the biggest achievements of a person's life. In most cases, it takes an entire lifespan to fulfil the dream of purchasing one's own home. Selecting the ideal property involves a lot of research and planning. Arranging funds is probably the toughest and the trickiest part of the process.
You could dip into your savings for the entire payment or decide to get a Home Loan at a good interest rate.
A decade or so earlier, borrowing from a bank used to be a cumbersome process but today financial institutions have simplified the entire Home Loan application and disbursement process. All leading financial institutions offer Home Loans with attractive interest rates, flexible repayment periods, quick turnaround times and unique product features.
Before finalising on a lender, one must understand the intricacies of a Home Loan.
Benefits of availing a Home Loan
1. An accomplishment - Every individual dreams of owning a house in their name. A home loan allows you to accomplish this feat and realize your dreams. This is one of the biggest financial investments you make in your lifetime and can therefore be considered an accomplishment.
2. Capital appreciation - Land is an appreciating asset in most cases. Construction costs have also increased over the years. As rents get more expensive with inflation, investing in your own house can shield you from inflation
3. Tax benefits - The Government of India has played the biggest role in boosting the home loan sector. As per Section 24B of the Income Tax Act 1961, you get a deduction of 1.5 Lakhs towards repayment of interest towards loans availed for purchase/construction of house property. This amount goes up to 2 Lakhs in case you are a woman and the property is registered in your name. At the same time, Section 80CC read with Section 80CCE of the Income Tax Act 1961 allows for a tax deduction up to 1 Lakh on repayment of principal amount of the home loan. This is one of the greatest incentives for people to opt for a home loan, even if you are able to afford to buy your house with your savings.