Loan Tips: If you have taken many loans due to various reasons and are facing problem in repaying them together then there is a dilemma which one should be repaid first.
Loan Tips: It is generally said that one should not spend more than one’s earning, but some requirements are such that one has to take a loan. For example, if you want to buy a house, buy machinery or take higher education, then most of the people have to take loan from banks. Your big needs can be met by taking a loan but it has to be repaid in the form of installments. Now let’s assume that you have taken multiple loans due to various reasons and are facing difficulty in repaying them all at once, then the dilemma arises as to which one should be repaid first.
According to Rajat Gandhi, Founder, Faircent.com, if you take any loan, try to repay it as soon as possible, but the case of home loan is different. Gandhi believes that the credit card bill or personal loan should be paid before the home loan. Gandhi gives three main reasons for paying off the loan for the home last.
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three main reasons
- low interest rates: Home loan has the lowest rate of interest as compared to other loans. In such a situation, pay the credit card and personal loan liability first and the one whose interest rate is higher in these first. Interest may have to be paid on these at the rate of up to 40 per cent, while the home loan rate can be as low as 6.5-7 per cent.
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- Tax Benefits: Unlike personal loan, credit card or auto loan, tax benefit is available on home loan and its interest. Home loan customers get benefits under Section 80C of the Income Tax Act. This is beneficial in the long run as the value of the house increases continuously.
- Wealth Creation: With a home loan, you create an asset for yourself. With consumer loan or vehicle loan also, you buy a property for yourself but their value keeps on decreasing.
(Article: Amitava Chakrabarty)
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