They say having a loan and insurance early in your 20’s ensures early retirement as before you turn 60, you have repaid every debt. While this is true, there are other benefits of availing a home loan in your 20’s. What are they? Let’s find out –
A home loan is a loan provided solely for the purpose of buying a house. The home loan consists of three major factors one needs to understand before availing the same, such as — it depends on the principal amount (that is, the actual fund required by the applicant), the repayment tenure (by which the loan will be paid every month in EMI), and the rate of interest (provided by the bank).
These three are co-related to each other. The higher the tenure, the higher the principal amount one can avail at a lower rate of interest; for the lower tenure, one can avail the lower principal amount with a higher rate of interest. To understand this, one should use the home loan EMI calculator, which enables a person to know the EMI required per month and the total repayment of the loan after the addition of home loan interest on the principal amount.
The normal rate of interest for the home loan are as follows –
|Customer Profile||Loan Slab||ROI* (%)|
|Salaried||Any Amount||6.70%* onwards|
|Self Employed||Any Amount||6.70%* onwards|
Availability of an early home loan guarantees longer loan tenure and lower EMI for every month. This will not only let you save parallelly, but also complete your home loan before your retirement. The repayment cycle is longer, and proper payment of EMI will also boost your CIBIL score, which will be helpful for other purposes.
Availing loans in your 20’s also gives the potential to get a huge amount of loan as the earning capacity along with the repayment longevity. This somewhere also helps you to discipline your finances and plan your outflows respectively.
Financial institutions and Banks look at the 20’s applicant as the low-risk profile. They believe that there is a higher potential earning capacity and future easy repayments, as they are not under many financial obligations.
Also, there are long term tax benefits one can avail due to home loan EMI which gives the exemption of principal and interest repayment amounts in the income tax return every year.
Plus, one should not forget that the house purchased in your 20’s at “X” value will have a higher-end price as per the market rate when you complete your loan, and thus, it can be said that it will be a good investment for wealth creation.
The only aspects one should keep in mind which availing a loan in your 20’s is that,
- You should earn sufficient to save some after your expenses and your loan EMI so that in case of emergencies, you have funds, and that will also ensure that you won’t lapse your EMI.
- You should ideally provide some payment of the house in downpayment so that you save the maximum in repayment.
- You should have ample surplus in other investments so that you don’t burden your financials due to the EMI.
It is basically a choice between paying rent every month and paying EMI every month. However, one should be careful with other aspects and not burn a hole in the pocket trying to pay for everything, not saving for the hour of need. Do proper research and decide before going for a home loan.