The eligibility criteria may be stringent, and a rejected application can negatively affect your credit score. Long tenor loans can be heavy on your pocket as it means you will be paying more interest. You can also incur fines and penalties for missing out on EMIs. Home loan interest rates, especially when high, can increase your monthly cash outflow. So, to check if you can afford it, calculate your home loan expenses in advance with a Home Loan EMI Calculator. Taking a home loan also leaves you with more liquidity of cash and savings that you can access during emergencies and times of need. You can also claim tax deductions on your home loan repayment, both in repaying the principal and paying the applicable interest. It is, of course, when you repay your home loan in a timely fashion. Taking a home loan to purchase your dream home can help you boost your credit score. Here’s how you can arrive at a sound conclusion based on your finances. An easy way to decide between the two is to weigh the advantages and disadvantages of both. These five factors differentiate a cash purchase from a home loan. However, applying for a home loan requires you to go through an application procedure and verify your documents before the loan is approved. All you have to do is pay the money upfront and pay all the fees like registration and stamp duty. Making a home purchase with cash comes with very few procedures or paperwork. The home loan can do the same as long as it's flexible and makes repayment convenient for you. However, it is important to note that cash payments can provide you with a sense of freedom after purchasing your home. Immediate ownershipīoth a home loan and cash payments can help you become a homeowner instantly. Cash payments, however, do not require any collateral, so your home is not at risk. Most home loans require you to pledge your new property as collateral to secure the lender's interests for providing you with a big sum of money. Bajaj Finserv, for example, offers you a home loan that can help you choose a flexible tenor up to 30 years for easy repayment and allows prepayment and foreclosure at no charge. Apart from that, it also offers you other benefits like a 3 EMI holiday, a top-up loan, and competitive interest rates. Also, with NBFCs offering home loans, you have access to various flexible loan options. However, planning your finances for repayment can make the process more convenient. The level of riskīorrowing any loan comes with a level of financial risk. On the other hand, cash payments, do not contribute to your credit rating in any way or require you to have a credit history. However, it is also important to note that if you don’t have a credit history, a home loan can help you build your credit history. The higher your credit score, the higher are your chances of receiving quicker approvals and lower home loan interest rates. Requirement for credit historyīorrowing a home loan requires you to have a good credit history. After demonetisation, arranging for enough cash could be tough, but if you have funds, knowing the pros and cons of cash payment against taking a home loan can help you make a smarter decision. There are two main ways of financing your home, pay in cash or fund your home using a home loan. Purchasing a home requires much planning, and how you fund your purchase is often the most significant consideration.
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