EconomyLoans

Home Loans- Important Considerations

Individuals get excited at the thought of owning a house. At the same time, nervousness creeps in when they have to apply for home loans.  This can be because one cannot take a decision between living in a rented flat or purchase the same. If we compare the rents we pay and EMI’s to be paid normally it is 10-15% of the variation. But such a sacrifice is worth it as the flat will be owned by the individual. Finally, when it is concluded that a home loan is to be taken then various thoughts come in as: from whom to take, how much amount, what should be the period etc., so it becomes necessary to have clear concepts when loans are applied for. Here are a few, for instance:

  1. Tenure of the loan -A loan comes with a financial obligation called interest. The loans are taken for longer periods than the interest burden shall be more. So the tenure of repayment should be chosen carefully. At the same time if the period is very less then the amount of EMI to be paid shall be high. Due to this fact, a careful thought and planning should go while choosing the same. Also, Planning should be done as to how to repay the loan. Many individuals invest in areas where fixed amounts can be got and with the help of those funds repay EMI amounts. This is also one of the methods but more financially viable is to accumulate excess funds and try to repay the loans at the earliest. This is because interest rates keep on changing. There is an option while taking loans whether to take on fixed rates or fluctuating rates. Both have their advantages & disadvantages. And if the loan is taken on fixed rates we can plan for amounts to be repaid but cannot take benefit of changes in interest rates. And if loan was taken on fluctuating rates it is the reversal of the earlier arrangement. In the long run, many a time, fluctuating rates are advantageous.



Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of Finaacle.com - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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