There are many financial services available in the market, such as personal loans, gold loans, car loans, and home loans. Still, the home loan is considered one of the cheapest and affordable in terms of the rate of interest on which it is provided. The interest rates for home loans start at around 6.65% while gold loan begins at about 7-8% and a personal loan above 10%. The main reason for this can be safety and security. Home loans are a secured form of loan and are secured against the value of the property. So banks don't hesitate much in providing finance. The property can be sold out in the market if the customer defaults on the home loan repayment.
Home loan EMI (Equated Monthly Installments) consists of two things-
- Interest amount
- A part of the principal amount
Home loan EMI includes the interest charged by the banks for providing the home loan services and a part of the principal amount, which is to be paid every month along with interest as EMI to reduce the debt liability of the borrower with the bank.
This is one of the main advantages of a home loan; there is no need to pay a significantly large amount of money to avail of a home of your own. The payments are to be made every month over a significant period to pay off the loan. This doesn't put an immediate burden on the pockets of the borrowers.
Along with this benefit, there are many other benefits of a home loan, such as Income tax benefits. Income Tax Act provides under Section 80 C the deduction for the payment of home loan EMI. This helps in reducing the tax liability of the individual with a scope of more savings.
Many people don't know it, but paying extra on your loan can reduce the tenure of the loan. Home loans are to be repaid in the form of EMI, and that is primarily because the total value of the home can not be refunded at once. If done extra at the time of availing, home loan repayment is more likely to reduce its tenure, passing the house ownership quickly to the borrower once the total payments are made.
Many services available in the market, such as HDFC home Loan, provide affordable and reliable services. Many more lenders and service providers offer similar services to maximize customer attraction, retention, and satisfaction. The home loan market has been turned into a cluster in the last decade as there are so many players in the market. This calls for a careful analysis of the lenders from the borrower's point of view. The borrower must understand the services provided by each lender, their terms and conditions, and whether they are in nexus with the person's requirement. If they are satisfied, then only they should apply for such a loan.
When that capital asset is sold in the future, you will attract capital gains, and The borrower can also avail of the deduction of the same under Income tax.
The pandemic situation has created difficulties both for the lenders and borrowers to perform their respective roles. The banks have to shift to online recovery in place of physical healing, and it is becoming more and more difficult for most borrowers to pay their EMI. If the EMI is not paid regularly, the credit score will deteriorate, and the person may not fit into the home loan eligibility criteria if their credit score falls below 750.
Banks are trying to shift almost all the services to online platforms. Home loans are also coming into the purview of such an initiative, and soon 100% implementation will be done over that.
Conclusion-
Home loans are made through online and offline platforms, but online modes are mostly preferred as far as the current situation is concerned. Home loans not only are available at affordable interest rates but also helps in the improvement of the credit score of an individual.