Buying a home is one of the most important decisions. The area and location you choose for your home depends on the budget. And then comes the crucial question of whether you should take a home loan or pay in cash to own it.
You should explore both the options to find their advantages and disadvantages. So, to help you out, we will discuss both the options in this blog and also highlight their pros and cons. Let’s check out.
Home loan vs. cash payment
Financing a home loan is quite popular these days. With this option, you can borrow from the bank to purchase a home or fulfill home improvement needs. The borrower agrees to pay interest rates and repay the amount in equated monthly installments over a fixed tenure.
Advantages of home loan
Lower interest rates
Unlike other finances, home loans usually have lower interest rates. Whether buying a luxury residential flat or investing in plots, you can get easy finances from a reputed bank at lower rates. It won’t cause you financial troubles since the amount is paid back in EMIs.
You get tax benefits
The best thing about a home loan is that it provides tax exemptions to borrowers. The interest rates and principal payable amount are excluded from the taxable income. Under section 24 of income tax, one can claim up to Rs. 2 Lakhs in tax benefits on a home loan.
Maintain your liquid funds
Taking a home loan gives you the flexibility to save your liquid funds. Uncertainties may arrive at any time in one’s life. So, spending your whole liquid fund to purchase a home doesn’t seem like a wise step. A home loan lets you save this fund and pay the amount in small installments.
Improves your credit score
When you pay off your home loan on time, it boosts your credit score. You become a creditworthy client for the bank.
Due diligence
When you take a home loan to purchase a property in India, the bank undertakes all the legal procedures. It verifies the property’s authenticity before sanctioning the loan. So, you can rest assured that the home you’re buying is legitimate.
Advantages of cash payments
No interest rates
The big advantage of paying off in cash is that you won’t be charged any interest rate. There won’t be a fee of any kind.
Outright ownership
Paying in case lets you own your home right away after the fulfilment of all legalities. It also offers a sense of security and you can take over your property immediately. It fastens the whole process.
Easier to sell
Since there is no leverage involved, you can sell your property easily.
Conclusion
Buying a home through a loan or cash payment is proportional to your financial condition. Before making any investment, it is pivotal to analyse your financial stability and consider your long-term financial goals. It is advisable to consult with a financial advisor to make well-informed decisions.
