A home loan is a financial solution that allows one to avail of a sizeable sum to purchase or renovate a residential or commercial property. Such a loan is secured in nature, i.e., you avail of the sum by keeping the property in question as collateral. The property, thus, remains in the lender’s name till you repay the entire sum with interest.
Apart from the obvious advantage that a home loan provides you with the means to purchase a property, there are a number of benefits to this credit facility. Read on to know why a home loan is the right way to go for aspiring homeowners and why they should apply for one sooner than later.
5 Benefits of Taking a Home Loan
Access to Sizeable Funds at a Relatively Low Interest Rate
A home loan is a secured loan, i.e., funds are sanctioned against a collateral, which is the property being purchased. Because the lender has a collateral, their risk of lending funds is substantially lower than that in the case of unsecured loans, such as a personal loan.
As a result, the interest rate applicable on a housing loan is relatively lower. At present, home loan interest rates are low, when compared with the historic trend. While they are not the their lowest, they are fairly low – to a point where aspiring borrowers can benefit from substantial savings on interest outflow.
For instance, the HFC Bajaj Housing Finance Limited, a 100% subsidiary of Bajaj Finance Limited, offers home loans starting from just 6.75%* p.a. for salaried and professional applicants, with EMIs as low as Rs.649/Lakh*.
Freedom to Prepay at Your Pace with Zero Prepayment & Foreclosure Charges
As per RBI guidelines, individuals with home loans linked to floating interest rates are free to prepay or foreclose their loan at any time. They face no additional charges or penalties when they do so.
So, in the event that you have surplus funds in the future, be it in a lumpsum or in parts, you can prepay your loan ahead of schedule. This allows you the flexibility to set your repayment pace.
Control Your Repayment Terms with the Balance Transfer Facility
Home loan borrowers today also benefit from the balance transfer facility. Balance transfer is a feature under which you can transfer the balance on your existing home loan to a new lender for better borrowing terms.
With a home loan balance transfer, the negotiating power remains with you. For instance, if you feel you are eligible for a lower interest rate than the one applicable for your loan at present, consider switching to a new lender. Your profile is assessed again and, if found eligible, you could be offered a more competitive interest rate.
What’s more, you also get the chance to reevaluate your loan terms. For instance, perhaps your expenditures have increased and you now prefer to pay lower EMIs. Apart from renegotiating your interest rate, you can also opt for a longer tenor, to make repayment easier on a monthly basis.
Before you go ahead and switch to a new lender, do consider talking to your existing one. Chances are that your existing lender will match the new terms being offered to you.
Savings through Tax Benefits
One of the key benefits for home loan borrowers is tax exemption. One can avail of income tax deductions on both, the principal and the interest amount, under Section 80c (up to Rs.1.5 Lakh) and Section 24b (up to Rs.2 Lakh) of the Income Tax Act. Moreover, you can also claim deduction for stamp duty under Section 80C (up to Rs.1.5 Lakh).
Given the savings one makes on income tax, it is fair to say that a part of your home loan EMI is offset against the sum you would have paid as income tax. Conduct a thorough cost-benefit analysis to calculate how much you can save under tax deductions.
Benefit from Thorough Legal and Technical Verification
A property purchase is a big undertaking for most of us, with repayment running into years if not decades. Thus, it is only rational that the property being purchased be free of any litigation and clear all basic checks in terms of its built and permissions. While checking this information can be complicated for most individuals, it is easy and straightforward for a financial institution.
When you avail of a home loan, the lender conducts through legal and technical checks to ensure you invest in the right property. This ensures your money is not stuck in a litigious property in the long term and gives you better clarity on any discrepancies.
Conclusion
A home loan comes with a number of pros. Be sure to consider all and research thoroughly before you apply. One of the key considerations when applying is, of course, the choice of lender. Apply with one the reputed lenders in the market to enjoy competitive terms and transparency in fees and charges.
One such lender is the HFC Bajaj Housing Finance Limited. The lender offers home loans at competitive interest rates for salaried and self-employed individuals as well as professionals. Applicants also benefit from hassle-free processing with minimal documentation and doorstep document pick-up. Apply today and get the loan disbursed in just 48 hours* from approval.
*Terms and conditions apply
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