The ease of finding ready homes and historically low borrowing rates have resulted in increased consumer power. Financial institutions lend 80 % to 90% of the property’s value as a mortgage, and the remaining 10% along with any additional costs related to the transaction has to be borne by the buyer. However, this 10% can also be a substantial amount which can be a bit difficult to arrange within a short span. In such cases, a quick loan can come to your aid.
While home loans are very helpful, they do not cover 100% of the expense related to buying a house. Thus, you are left with the burden of arranging a lump sum amount for facilitating the purchase. Suppose, you paid Rs. 80,000 for booking the house and you need to pay additional 12 lakhs as a downpayment. Now, failing to arrange this 12 lakhs within 6 months of booking would result in cancellation without getting the Rs. 80,000 you paid for a booking.
But arranging 12 lakhs in 6 months can be a huge task. Also, if you have 12 lakhs in your savings, putting all of it on your home purchase can leave you vulnerable. In such a situation, you can consider an instant cash loan.
Read on to understand the benefits of using a personal loan for a downpayment on a house.
Benefits of Taking A Personal Loan to Fund Down Payment
Though you can avail a home loan to finance your home purchase, your home loan won’t cover the downpayment which is a substantial amount. A personal loan can help you in paying this downpayment with ease.
Here are some of the benefits of taking a personal loan for a down payment –
1. Quick availability of funds
The application process for personal loans is known to be quick and simple. After submitting your application with all the necessary details and supporting documentation, the lender will send you a confirmation message. After reviewing your profile and supporting documents, the lender will decide whether to approve or deny the loan application.
Also, receiving all loan application updates via emails and text messages is a big plus. When you have provided all the necessary documentation, the loan approval procedure normally takes 2 to 7 days, depending on the terms and conditions of the lender. The disbursement may take an additional one to two days after approval.
2. Flexible repayment terms and usage
The payback period for a quick loan can range from one year to five years. You can choose the tenure of the loan according to your needs and convenience. In specific circumstances, the term may be increased by up to seven years.
An instant cash loan can be used for multiple purposes. You can use this money to pay for a downpayment, registration, interiors, furnishing and any other expenses related to your home purchase.
3. No collateral
The primary benefit of a personal loan is that it doesn’t demand collateral, which means you won’t have to put up your assets to secure the loan. You just have to meet the eligibility criteria and furnish the needed documents to get an instant cash loan.
4. No need to use your investments/savings
When you are in need of finances the two options that come to your mind are – selling your investments or borrowing money from friends or relatives. Breaking your investment may not be a smart move if you made it as part of a long-term financial strategy. Borrowing money from your family members may cause tension in your relationship.
An instant cash loan can save your savings as well as your investments. In addition to this, you can repay your quick loan in small instalments which makes repayment much easier in your pocket.
5. Tax benefits
Tax deductions for personal loans taken out for specific purposes, such as house renovation or purchase, are permitted by the Income Tax (IT) Act. Buyers may claim deductions for interest paid on personal loans under Section 24(b) of India’s Income Tax Law if the funds are used to finance a down payment on a home.
If the property is self-occupied, the refund is limited to Rs 2 lakhs per year. This still holds true even if you use this money to upgrade your home. The total amount of interest might be deducted, nevertheless, if the property is rented.
Even with the help of housing loans, it could be challenging to come up with a down payment especially if the property’s value is high. In this situation, a quick loan might be beneficial to pay for your dream home.
Many financial institutions currently offer instant cash loan that has already been pre-approved. If you apply with one of these online pre-approved offers, the personal loan amount may well be deposited into your account in just a few minutes.