Buying a home of their own is a dream for many in India, and home loan options are something that truly makes that possible. But just like anything else, there sure are some very crucial things to consider before you sign up for something like that. Sure, there are possible benefits of going with a home loan, but it is not without its drawbacks. Today, we are here to unpack just that so that you can make an informed decision on your own without having to rely on anyone else. Alright, let’s get to it then shall we?
Pros of Taking a Home Loan in India
1. Easier Home Ownership
One of the biggest benefits of taking a home loan in India is that it makes owning a home possible for more people. Most of the time, home loans have long payback times, usually from fifteen to thirty years, allowing manageable monthly payments. This makes it possible to acquire a home without necessarily having to raise the whole amount at once, which is especially helpful if you’re just starting your career or haven’t saved a lot of money yet.
2. Tax Savings
Getting a home loan can also save you money on taxes. See, under Section 80C of the Indian Income Tax Act, you can reduce the income you pay tax by up to ₹1.5 lahks every year for the money paid back on the loan’s principal. Moreover, under section 24B, one can bring his/her taxable income down each year by up to 2 Lakh rupees, considering the interest that one pays towards his/her home loan. These tax cuts can lower the taxes you owe and save you money over the time you’re paying back the loan.
3. Increase in Property Value
Buying a flat or house with a loan is also a smart money move because the value of houses usually goes up over time. As time goes on, your house is fully returned, and your home could actually be worth way more than what you bought it for. If ever you sell the house in the future, that is a pretty solid profit from the increased value.
4. Better Credit Score
Taking a home loan and paying it back on time can improve your credit score too. Timely repayment of the home loan can enhance your credit score and will help you get any future loans at lower interest rates and that’s pretty obvious, isn’t it? Paying off your home loan in time reflects back to the lenders how reliable a person you are, and thus makes it easy for you to borrow money in the future.
5. Smart Investment
A home loan lets you make a smart investment by buying a property with a small initial payment, thus, you are able to save your savings for other investments or emergencies. This comes in handy in the market where the prices of property are rising. It allows one to get in the market and benefit from a price rise later without putting in all your money at once.
Cons of Taking a Home Loan in India
1. Long-Term Financial Burden
Getting a home loan can help you buy property, but it also means a long-term financial commitment that might last for many years. This continued financial liability may be paralyzing and could prevent one from shelling out big money for other equally important needs such as education, retirement savings, or health.
2. Interest Costs
Even though the interest rates on home loans EMI are usually lower than other loans, the total interest you pay over time can be literally a lot. For example, if one took a 30-year or 20-year period loan, the interest accumulates to one ending up paying as much or even more than the principal loan. This, therefore, accumulates in making the overall cost of owning a home far much higher.
3. Risk of Financial Instability
Sure, life can be full of surprises, and your financial situation can change suddenly because of things like losing a job, getting sick, or other personal emergencies. These changes may really make it hard to keep pace with monthly loan payments, which may eventually become serious monetary problems or even home loss if loan repayment cannot be afforded.
4. Opportunity Cost
The money you use to pay back a home loan is locked up and can’t be used for other investments. Besides, you would have a cost in regard to making more money in good markets from high-return investments. So this is something very, very crucial to consider, and when the economy is changing, other investments could actually, in fact, be making more money.
5. Reduced Flexibility
Having a long-term home loan can limit your financial flexibility. The need to service the loan by contributing monthly only implies that a huge share of your income is already at work and, therefore, you can not just simply put that money to use for some extra cost or any other investment opportunity that you have in mind. Doesn’t that seem restricting?
So, Is a Home Loan Really Worth It In India?
All in all, yes, deciding to get a home loan in India needs careful thinking about the good points and the bad points. These benefits of ownership, combined with tax advantages and the possibility of the value of the home rising, are some of the reasons so many people enter into such a long-term commitment with a home loan. A home loan is a good idea if you feel sure of your money’s future and are able to return the loan with time without hurting other money goals. That is, it is worth shopping around for the best loan options and even picking a house that is more likely to increase in value. After all, the choice should be in a position to match your money goals and how much risk you can be able to take and should also be in line with the future plans that you may be having.
Conclusion
As you saw, a home loan can surely be a beneficial thing for many, but then there are the shortcomings of it which you should never skip. We tried our best to lay down what pros and cons there can be regarding a home loan in India, but now the decision is truly yours to make.
