Home Loan vs Cash Payment – Which Should You Choose to Buy a Home?

A dream home often commands a price that makes many wait before they go on to buy it finally. While a lot of us wait till they become eligible for a home loan to do so, a few gentlemen manage to pay the full price in one go. In case you are so, congratulations on an interest-free home acquisition! However, those having to take a home loan can also smile now as interest rates have fallen to as low as 6.50% per annum. Besides, tax savers help you recover some of the amounts you pay through the loan EMIs. A discussion on the same can only help us. Let’s begin!

Benefits of Home Loans Over Cash Payment

A home loan not only ensures a hassle-free home purchase but also saves you some for emergency needs through tax exemptions and low-interest rates. Let’s check its benefits below.

Falling Home Loan Interest Rates

Home loan interest rates have been constantly falling since 2019. The rates have reduced by as much as 2.50% per annum since. So, if a 20-year loan of INR 50 lakh was fetching someone an EMI of INR 45,000 two years ago, the same has fallen to INR 40,000. And if you choose to pay the same EMI even at the current interest rate, the loan will wrap up earlier than scheduled and save you further on interest payments.

Tax Benefits

A home loan comes with tax breaks on both interest and principal constituents of the EMI you pay to the lender. Principal repayments allow you tax exemptions of up to INR 1.5 lakh in a financial year under Section 80C of the Income Tax Act. Whereas tax exemptions on interest repayments are up to INR 2 lakh under Section 24.

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Scope for Emergency Fund Availability

By opting for a home loan, you allow some cash to meet emergency needs that can arise anytime and leave you restless otherwise. A medical emergency, if and when it comes, can put you in a huge spot of bother in case of no savings. Yes, health insurance is there to take care of such needs. But even that has a certain limitation as it does not cover all diseases and conditions. So, emergency cash has to be there to feel comfortable at all times. A home loan can help you ensure so.

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  • Home Loan Interest Rates May 2022
    Axis Bank6.75% - 7.20%
    Bank of Baroda6.75% - 8.25%
    Citibank6.65% - 7.40%
    HDFC7.00% - 8.10%
    ICICI Bank7.10% - 7.95%
    Indiabulls Housing Finance Limited8.65%
    Kotak Bank6.55% - 7.10%
    LIC Housing6.66% - 7.90%
    Piramal Capital & Housing Finance10.50%
    PNB Housing Finance6.75% - 9.25%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI6.70% - 6.90%
    Tata Capital6.90% - 8.75%