The government of India is planning to introduce a new housing scheme in the Union Budget 2017 to utilise the money from the demonetisation drive, according to a report on ET Now in November 2016. The report also claimed that interest rates would stand between 6% and 7% for home loans of up to Rs. 50 lakhs and a new scheme would be available to first time borrowers. So, if you too are planning to take a home loan, then the expected interest rates make the coming months the best time to take such a loan.
And if you in need of liquidity for any reason and are torn between loans against property and personal loans, here’s a look at which option could prove better.
4 Reasons Why Home Loan is a Better Option to Personal Loan
- Low interest rates:Home loan interest rates are low enough to make it the cheapest retail loan, while the interest rates on personal loans are much high, usually going up to 16% to 21%. If you need funding for purposes like marriage or medical treatments, repaying such a huge interest rate could prove to be a burden in future.
- Longer tenure: The maximum loan tenure for mortgage loans are 15-20 years, while the maximum tenure for personal loans is only 5 years. This is the greatest advantage, if you are young and have your earning life ahead of you to repay the loan amount.
- Cheaper EMIs: With a longer tenure and lower interest rates, home loans automatically results in the lower Equated Monthly Installments (EMIs). This is the main reason why people prefer this type of funding to taking a personal loan.
- Larger loan eligibility: Since the eligibility for financing depends on the value of the property and the income of the borrower, you are likely to able to raise a higher amount when mortgaging a home.
Although home loans seem to be a better option, always keep in mind that the lender can take possession of your mortgaged home if you default on the repayment. So, always consider your repayment capabilities before making a decision to take a loan against property.
In addition, with the uncertainties created by the demonetisation move, the real estate market in India has been seeing a decline, a trend that is expected to continue for a few months, till there is greater clarity regarding the future of this move. Therefore, for those wanting to fulfill their dream of owning their own home, the next few months could be the best time to get a good deal on property rates, along with lower home loan interest rates.