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Tips & Advice

Signs Which Indicate That You Are Getting Into A Debt Trap

Remember the fable of a frog that boiled itself to death after falling into a pot of water? The water was pleasantly warm when the frog fell in, but the amphibian simply adjusted its body temperature to stay inside. When the water reached its boiling point, the frog could neither manage its body temperature nor jump out successfully. Same is the case with a large section of people who fall into a debt trap without realising it. Like slow poison, it erodes their quality of living and peace of mind. [B-01] What is Debt Trap? Typically, a debt trap is the result of mindless borrowing without checking if one has the ways and means to repay it. Loans are the easiest tools at common man’s disposal to fulfil his dream of buying a house or car, or to meet medical expenses. As such, debt is unavoidable for most people. But debt trap is something that everyone should be wary of. Let us look at some warning signs that indicate a person is falling into a debt trap. Too many loans: You have too many EMIs to pay throughout the month on several loans you have taken. The risk of defaulting on repayment is high, and it will have a cascading effect if missed. If more than half of your monthly income goes out as loan repayment, you are in a debt trap. EMIs are not the only villains. Generally, if your monthly expenses, say utility bills and house rent, take up more than 70% of your earnings, your chances of falling into a debt trap are high. Such expenses should not cost more than 50% of your income. And if you do not have the money to pay your utility bills, it is a sure-shot sign of gliding into a debt trap. Betting on future income: If the thought of festive discounts and sales thrills you to such an extent that you decide to opt for a loan with an EMI that only a revised salary can pay for, then debt trap is nearby. What would happen if you lost your job or did not receive the expected increment? Also, there are loan products whose EMIs increase after a few years. Such interest rate spikes can lead to almost 20% rise in EMIs, which monthly salaries alone would not be able to offset. So if you do not have other income sources and are still gung ho about future income-based borrowing, your chances of getting into a debt trap is high. Borrow to meet daily needs/pay EMIs: If you do not have any money left in your bank account and have missed EMIs, you have no choice but to borrow from relatives or friends. Banks won’t lend anymore as you have a poor credit score, but NBFCs might lend you cash at a higher interest rate. This would only make you fall deeper into the debt trap. Credit cards: The cash advance fee on cash withdrawal using a credit card comes to 2.5% to 3.5% of the transaction amount per month. If credit card payments are put off by paying the minimum due amount, which in fact is quite low, your repayment capacity would be severely reduced by the high-interest rates. If the credit card limit is exceeded, it is high time you track your finances. [B-02] Debt Consolidation Loan While lifestyle changes and finding new ways of income can save you from the debt trap, the most important step is to take a debt consolidation loan. For that, all outstanding loans and their interest rates should be calculated, and a lower-cost personal loan that can clear all of them should be taken. A debt consolidation loan allows you to focus on paying only one pending loan. A debt consolidation loan also reduces your chances of missing a payment or making a late payment and may improve your credit rating. Professional loans are the best way to make a new start for working professionals who have fallen into the debt trap. Professional loans offer competitive interest rates and are priced better than personal loans. What matters most is making the right choices to live a debt-free life.
08-11-2023
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Tips & Advice

How Does Getting A Machine Loan Can Help You Grow Your Business?

For better sales and steady growth, as a businessperson, you need to have the right machinery. Irrespective of your industry, the machines you use have to be at par so that you can warrant maximum production and profit. With the help of the latest technologies, your machinery increases the production many folds and helps reduce the cost of labour/workforce and improve the overall efficiency. [B-01] Worn-down machinery or the necessity of a new one may often require capital financing. In such a scenario, if you need capital loan finance, there are many options that can help you in dealing with insufficient funds. Machinery loans can be taken in the form of a small business loan as well. To further boost the booming economy, the government has introduced several capital financing schemes that can greatly help small to medium businessmen. Let us take a look at the highlighting features of small business loans: 1. Pocket-Friendly Rates Facing financial issues can be detrimental to your business. In such a time, getting a capital loan at affordable prices can be a blessing. 2. Freedom to Choose Most banks offer capital loan finance to small businesses allowing a lot of flexibility in loan repayments, tenures, pre-payments etc. 3. Unsecured Capital Loans There are banks that allow certain small loan amounts to start-ups and small businesses without collateral. 4. Ease of Online Banking For a businessman, time is money. And you save a lot of it with online transactions. Online banking also makes money transactions simpler, quicker and convenient. Now let us take a look at the different working capital loan options that are available: 1. Credit Guarantee Fund Government Business Loan Scheme Credit Guarantee Fund Government Business Loan Scheme, CGTMSE, is probably the most suitable capital loan scheme for MSMEs. While offering collateral-free loans, you can avail of the loan through an authorised rural bank or commercial bank. The loan amount can go up to INR 10 lakhs, and above depending on the eligibility. 2. MUDRA Loan Created to offer capital loan finance opportunities to non-corporate, non-farm micro/ small enterprises, MUDRA loans can be taken from almost all kinds of banks in the private and the public sector including rural banks, corporate banks and small finance banks. To apply for the bank, you can visit the official MUDR website.Here are the eligibility criteria you need to look out for. The applicant: can be a non-corporate small businessman/ proprietor including: Shopkeeper Small manufacturing unit Food-service unit Repair shop Machine operator Food processors and others 3. Credit Linked Capital Subsidy Scheme Another credit scheme by the government aimed at technological upgrades of small businesses. This can be an ideal option for your machinery loan, as it gets you a 15% subsidiary on your eligible machinery investment.For this capital loan finance, you need to apply as a Single proprietorship business Co-operative or public/ private limited company Partnership firm 4. Business Loans by Piramal Finance Limited Getting a business loan has been made simpler and easier by PCHF. Speedy disbursals, minimal documentation along with an efficient and proactive 24X7 customer care, ensure that your working capital loan needs are fulfilled at the earliest. You can apply for your machinery loans up to INR 25 lakhs. An interest rate of 12.5% makes the loan an affordable option.Let us take a look at the eligibility criteria. The applicant: Must be from 21 to 70 years of age Can be either salaried or self-employed [B-02] Conclusion: When you work with machines, you need to be prepared for their natural wear and tear. Working capital loan in the form of a machinery loan can not only help in upgrading and repairing machines, but it can greatly boost the smooth running of your business. So, do not let your production get hindered due to a delayed upgrade of your machine. With the multiple options explained above, make an informed decision about the right capital loan and carve new ways for your company’s success.
08-11-2023
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What Is A Professional Loan?

Working professionals such as architects, chartered accountants, company secretaries, lawyers and doctors are usually looking to expand their services or invest further in their own existing / new practice. Professional loans are targeted at such people to help them meet their ambitions. Through this blog, we shall see the different aspects of professional loans and how to avail them. [B-01] Benefits of a Professional Loan Some of key benefits and advantages of a professional loan are listed below: While there are several secured professional loans which can be obtained by using your property as security, one of the unique benefits of a loan for working professionals is that they can also be availed without putting up any collateral. This is extremely helpful for young professionals who are in the process of setting up their practices. The process is hasslefree and paperless. It can be easily concluded online without the need of complicated documentation, as shall be explained in a later section. The loan approval is very quick and disbursal does not take long either. There are several customized options available regarding prepayment and part payments of the loan amount. Due to the prevalence of several banks and non-banking financial companies (NBFC) in this segment, loan seekers get competitive rates with minimal additional charges incurred. Eligibility Criteria While the eligibility criteria may differ slightly among different lenders, described below are the common factors that most lenders consider in general. The borrower must be a resident of India between the age group of 21 years to 65 years. In case of an existing practice, the minimum income should be Rs.1 lakh per annum. People with 4-5 years of prior experience in their field stand to get better loan amounts. People trying to set up a new practice should possess a professional degree or diploma in their line of work. Documents Required The documentation needed while availing a loan for working professionals is basic and minimal. However, just like the eligibility criteria, the documents required are also bound to vary between different lenders. In order to guide you in the process, here is a list of the most commonly sought documents by the lenders. Identity Proof- PAN Card, Aadhar Card, Passport, Voter ID. Address Proof- Aadhar Card, Passport, Voter ID, Driving License, electricity or telephone bills. Bank Statements for the business / self (including salary slips for salaried people) for the past 6 months. Income Tax Returns and Form 16 for last 2 years In case of existing practice – Profit and Loss statement of the business In case of setting up a new practice – Copies of your professional degrees/diplomas In case of a secured loan – Documentation of the property offered as collateral. How to Apply for a Professional Loan? Armed with all this knowledge, you can now conveniently apply for a professional loan online by following these basic steps: Visit the website of your chosen lender and go to the professional loan application page Carefully and accurately fill the online form with the requisite details Attach the relevant documentation The loan provider will commence the assessment process for the application Once approved, the loan amount will get disbursed in your account within 24-48 hours. [B-02] In Summation Professional loans are customized and tailor made to the specific professional requirements of different categories of salaried or self-employed people. They are easy to procure, require minimal documentation, have competitive rates and can be repaid in convenient and flexible payment plans. Piramal Finance is renowned for its quick and smooth application process, offering maximum borrowing limit based on eligibility, and speedy disbursal to get you started on your professional journey.
08-11-2023
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Why Debt Consolidation Loan?

When it comes to debt consolidation, there are many misconceptions. It is important to understand the different aspects of debt consolidation so that you can plan your finances accordingly and make smarter financial decisions. Making poor financial decisions can lead to bad debt and increased credit repayment amounts that can lead to further debt. It is best to put a halt to this incessant cycle with a single debt consolidation loan. There are many debt consolidation loan benefits. In this article, we will have a look at debt consolidation loans and understand how they can be beneficial when it comes to the repayment of debts. [B-01] 5 Things You Need to Know About Debt Consolidation Loans Before deciding on a debt consolidation loan here are 5 key aspects that you should know. 1. It is Affordable Debt consolidation loans are considered to be affordable as they provide a greater range of flexibility while providing the benefit of nominal interest rates. In addition, it can be less of financial stress to repay a single loan rather than paying several debts that have varying interest rates. With a consolidation loan, you have a range of other benefits such as a unique flexi loan facility with which you can repay interest similar to that of EMIs. 2. Single Debt Agreement A debt agreement is essentially a contractual agreement between the lender of a financial instrument and the borrower. The main terms of this concern determine your ability to opt for additional borrowings. This way, the amount of the debt consolidation has to be used only to repay the outstanding debts that you have. With this agreement, you are also bound to pay your debts in a particular fixed period without any delays. In case of further delays, the debt can lead to the lender charging you with fines and penalties. 3. Does Not Clear Existing Debts It is key to understand that a debt consolidation loan does not reduce your debt obligation. The process of availing a debt consolidation loan does not eliminate your debt altogether. Instead, it makes your repayment process easier. Once you repay all of your existing debt with this loan amount, you will still have to repay the consolidation loan. You can make these repayments as EMIs throughout the tenor or can also choose to repay the entire loan as a lump sum amount. 4. Repay Multiple Debts With One Affordable Loan Usually, the process of repaying multiple debts can be challenging. Some of the main aspects that contribute to this challenge are varying interest rates, managing different streams of repayment, and others. For instance, you could have different credit card bills, home loan repayment, personal loan EMI, and others to repay on a recurring basis. Multiple repayments can also lead to errors leading to you defaulting a repayment. Instead, you can repay all of your debt such as credit card bills and other borrowings using a single debt consolidation loan. 5. Restricts Borrowing More During Consolidation In response to repaying many different streams of debt, it can be common to opt for more credit. Borrowing more debt can only result in a further complicated process of repaying debt. Instead, with a debt consolidation loan, you can opt for one stream of credit and repay several streams of debt. [B-02] In Conclusion Debt consolidation loans have numerous benefits that can simplify the debt repayment process. You can apply for a debt consolidation loan online with minimal paperwork and less hassle. If you are looking to avail of a loan, Piramal Finance can be beneficial. Along with excellent service, you can experience several other benefits such as quick approval and fast disbursal.
08-11-2023
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Myths

Common Home Loans Myths

Getting a home loan in itself can be a process that involves plenty of research. Meanwhile, there are quite a bit of myths that are circulated around. So, while researching home loans, it is important to discount these myths so that you can make smart and informed decisions. In this article, we will have a look at the common myths that revolve around home loans. Understanding these myths will help you classify between accurate and inaccurate information during your research process. [B-01] Top 5 Common Home Loan Myths There are plenty of myths tossed around with respect to home loans in India. Now that the interest rates that are offered on home loans have decreased, most of the myths have been around the interest rate and the EMI that has to be repaid to the bank or lending institution. Pre-Approval Is the Same As Pre-QualificationGetting your home loan pre-approved is the process of identifying and understanding your eligibility to apply for a home loan. During the process of pre-approval, you will be asked to submit your personal information, financial information, and your property documents. If you get your home loan pre-approved, you would not have to repeat the eligibility verification process while applying for a home loan.However, getting your home loan pre-approved does not mean that you are qualified to have the home loan disbursed. The final decision with regards to disbursal of your housing loan amount is dependent on the bank or the lender. It could so happen that you can be pre-approved and end up not being granted a home loan. Higher Interest rate Translates To Higher EMIs When the lender offers you a higher interest rate, it is natural to get concerned about higher EMI repayments which could result in a financial crunch. However, it is not necessarily true. Many banks aim to make the process of EMI repayments nominal and easy for the customer. You have the option to increase your tenure and decrease the amount of EMI that you would have to pay.The bank or lending institution calculates your home loan interest rates by considering several parameters such as your age, income, credit score, and others. Having a good credit score and a good income can help fetch you a lower interest rate. Loans With Lower Interest Rates Are Good DealsMany people tend to believe that banks and lending institutions that offer a lower interest rate are a good deal. However, it is important to be careful about plans that are offered. In many cases where the bank offers an exceptionally lower interest rate compared to market standards, several other fees are charged. It is best to check for charges like penalty for prepayment, legal valuation fee, processing fee, and others.If these extra charges are expensive, you might end up paying an exorbitant amount in compensation for the low interest rate. Make sure that you understand the terms and conditions thoroughly and ensure that you have no hidden charges on your home loan. Fixed Interest Rates Are Better Than Floating Interest RatesWhen you decide on the nature of the interest rate, it is best to consult with your lender and consider your financial capacity. With a fixed interest rate, you can enjoy the same rate of interest throughout the tenure. With a floating interest rate, the amount of interest that will be charged will vary depending on the fluctuation in the interest rate. Pre-Payments Carry Penalty ChargesPenalty charges for pre-payments might be charged by a few banks. However, there are exceptions when it comes to these penalty charges. It is best to verify these charges with the bank you plan to take a housing loan from before coming to a conclusion. [B-02] In a Nutshell While availing of home loans in India, it is natural to come across several home loan myths. It is best to research thoroughly and validate the information you find on the internet to make sure that you are informed accurately. This can help you make the right choice with regard to your housing loan.
08-11-2023
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How To?

How To Apply For Home Loan Online?

Understanding Home Loan Every person’s dream is to own a home. Most of us, though, cannot afford to buy the house outright. Taking out a home loan is one of the better ways to get your dream home. To be able to obtain the finest home loans in India, you must first comprehend the many terms related to home loans and then plan appropriately to obtain the best home loan in India through the online medium. [B-01] A home loan, sometimes referred to as a housing loan, is a sum of money borrowed from a lender to buy or build a home. Home loans can also be used to expand existing residences. There are various forms of home loans: For the buying of a residence For the purpose of constructing a residential property For the purpose of purchasing land For the purpose of home expansion Things to Consider while Applying for a Home Loan Online With the current progress in technology, Loan application processes have become completely online. The process is considered by many as much safer because there is no need to visit a physical branch. While the process remains similar, with an online application, it is important to be very careful with the documentation process to avoid delay in communication. Visit the loan provider’s website. Understand the specifics of the loan being offered, like information about the tenure, the interest rates, etc. Complete the Application Process, which includes entering the required loan amount too. Submit the necessary documents. The application will undergo verification from the lender’s side before the next step is taken. Amount of the loanThe principal amount of money you are eligible to borrow for your house is referred to as the loan amount. The amount of home loan you can get is mostly determined by your home loan eligibility, which is determined by a number of factors such as your CIBIL score, employment type, and income, among others. Piramal Finance (PCHF) only requires your documentary proof to determine your home loan eligibility. Disbursement of LoanThe quantum of house loan is considered to be disbursed when it is deposited to your bank account after your eligibility and documentation verification has been verified. Repayment of EMIsYour Equated Monthly Instalment will begin one month after you have received full loan disbursement. You must repay your house loan in equal, regular monthly instalments to repay your home loan. Loan DisbursementWhen you pay your EMIs up until the end of your loan term, you have paid off the principal as well as the interest. Home loans are typically paid off within the tenure or time for which they were obtained, however they might be foreclosed or prepaid. Prepayment fees are not charged in the case of floating interest rates, but they may be charged in the case of fixed interest rates. If you do not prepay your loan, you will be required to make timely EMI payments until your loan term expires, at which point your loan will be closed. That is, your home loan books will be closed. Do you Qualify To Apply for a Home Loan? Now that you have understood the basics of how to apply for a housing loan, it is important to check the criteria. You must be between the ages of 23 and 62 to be considered. Salaried staff must have at least two years of experience. Individuals who work for themselves must have at least three years of experience in their current area. In the case of NRIs (Non-Resident Indians), they must be salaried employees with at least three years of experience. What Documents Do I Need to Apply for a Home Loan? An applicant just needs to submit one or two items from each of the following categories: Valid passport, driver’s licence, life insurance policy, birth certificate, PAN card, and school leaving certificate are all acceptable forms of proof of age. Voter ID Card, Valid Passport, Driver License, Aadhar Card, and PAN Card are all acceptable forms of photo identification. Utility bills, bank statements, property registration documents, property tax receipts, and voter ID cards are all acceptable forms of proof of address. Existing loan information will be available through bank statements. [B-02] What is an EMI Calculator for a Home Loan? Due to the large size of most property loans, paying them in EMIs (Equated Monthly Instalments) helps to evenly distribute the loan burden. Manually calculating EMI is often complex, and as a result, people frequently get incorrect findings. An EMI calculator for a house loan is a simple online tool that rapidly calculates the Equal Monthly Instalments required to repay your home loan.
08-11-2023
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How To Apply For A Business Loan?

Do you require money to grow your business? If so, then it is time to apply for a business loan. The application process can be daunting, but not impossible. With the right information and guidance, applying for a business loan should not be difficult at all! This post will provide steps on how to apply for business loan in order to get the money your company needs. [B-01] What to know about it? Apply for a business loan from the right lender. Make sure your documents are updated and ready to go. Since you will be going through different processes, it is best if all of your paperwork with contact information, financial statements, etc., are available at all times so that they can quickly assess whether or not you qualify for a business loan online. Complete an application form that includes detailed personal data as well as company details such as incorporated status, ownership structure, and more. A bank may require additional supporting documentation from time to time in order to process their clients’ applications effectively. Be prepared! While banks typically do not ask too many questions about where the money comes from initially because most loans come directly from investors; however they always conduct thorough background checks. It is important to be transparent with the bank about your business dealings and financial situation if you need to avoid any unnecessary delays in processing time for this business loan online application. Lenders will typically provide a response within one week although some companies may take longer than that depending on their own internal processes. So make sure all conditions are acceptable beforehand. After the money has been deposited into your account, make sure to thank your lender for their support. It is essential that borrowers are aware of all terms and conditions involved since lenders may ask potential clients some critical questions about their company’s financial situation before providing an offer letter as well as different pertinent details such as interest rates, fees, repayment schedule, etc., which vary from one borrower case to another when you apply for business loan. Step by step process to apply for a business loan online: Locate the right lender for your business. There are many options online, so you should find one that fits your budget and requirements accordingly. Be prepared! Have all of your documents ready at hand to quickly process this application. After completing an application form, send off as much relevant documentation as possible such as personal data as well as company details such as incorporated status, ownership structure, financial statements, etc., so that they can assess whether or not you qualify for a business loan with them directly without having to ask further questions. Wait patiently for a response since the bank may take up to several days before providing an offer letter that outlines the terms of your agreement between both parties as well as other important details. Therefore, read it carefully beforehand to avoid any additional delays or problems with processing time! Once you sign off on everything and money gets deposited into your account after approval. It is also good practice to let them know if you need more funds in the future so they can grow even bigger than what they are right now! After receiving this information (i.e., approval), complete the necessary steps, which may include signing off on everything and waiting until money has been deposited into your bank account. Finally, it is essential to be transparent with the lender about your company’s business dealings and financial situation if you are open to receiving additional funds in the future to help them grow even bigger than what they currently are! [B-02] Marketing Tip: Keep a close eye out for any potential scams when looking online. Not every lending agency will offer competitive rates or provide good customer service, so you should always do some research beforehand before making this decision. You can also ask around among friends, family members, or co-workers who have recently applied for loans through their chosen lenders whether or not they were satisfied with how things turned out afterward.
08-11-2023
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How To Get Working Capital Loan In India?

Working capital is an important dimension of any business, whether it is a start-up or medium sized venture or an established organisation. It refers to the amount that any business entity has at its disposal at all points in time to cater to short term expenses and can be calculated as the difference between the current assets and liabilities that it has. For small and medium-sized companies, having continuous cash flow that can be used as working capital is a difficult proposition due to the less amount invested and uncertain profitability. This is where having business financing facilities can help tide over temporary financial issues without having to burn a hole in your pocket. Read on to know more about how you can get working capital loans or small business loans or sme loans, from PCHF to mitigate the burden of sudden business expenses. [B-01] Know the Different Types The first thing to know before you take the decision of opting for capital loans is the various types of business financing options that are available at your disposal. They are: Trade Credit- This type of financing takes place between two traders wherein one purchases goods but the payment is made later. Bank Overdraft- In this type, financial institutions extend short term credit to the account, the moment the balance becomes zero and enable the account holder to withdraw money despite insufficient balance. The amount then is paid later. Account Receivables- If you have amounts not paid by your customers in exchange of services or goods provided, the bills of the due amounts can be sold to financial institutions at discounted rates. The latter then provides immediate cash in lieu of the same which can be obtained from the debtor when the bill matures. Short Term Loans- For meeting emergency situations, short term SME loans can be taken for a tenure of 1 year. These loans have a quick approval and disbursal process with minimum documentation work. Types of Businesses Eligible for Working Capital loans If your business entity is any of the following types, you can opt for a working capital finance without much hassle. Sole Proprietorship Limited Liability Partnerships Private Limited Companies Apart from these certain criteria like a decent annual turnover and number of years that your company has been running the business are also considered by financial institutions. The type of trade you are running also determines your requirements and the ease with which you will get the loans. Documents Required for Small Business Loan The documents required for applying for small business loans are: Standard KYC documents that include name, address, identity, age proofs Certificates of business incorporation, including registration documents, goods and services tax Last six months bank statement of the Business Current account Current year’s IT returns Outstanding debts and its details, if any Purchase orders indicating the type of goods ordered and the total capital required for the same Where to Apply for Working Capital Loan There is no dearth of sources from where working capital can be obtained. Bank Aggregators- If you do not have time to spare to look for your business loan sourcing, you can try out the Online Bank aggregators or financial institutions who offer loans for working capital at affordable rates of interest. The application process is also quite easy and approval comes fast if you have all the documents in place. Banking Institutions:- Many banks such as Punjab National Bank, State Bank of India, Indusind Bank offer small business loans at competitive rates. It becomes more advantageous if you have an account with any of the banks offering such loans. Online Lenders- If you are looking for quick cash, these online lending platforms can be just the right ones for you. You can download their apps on your phones and look out for offers on interest rates that come from time to time. [B-02] Conclusion Negative working capital is the watchword for dwindling business. To avoid such situations from cropping up, it is best to go for business loans from such reputable financial institutions as PCHF and let your business reach its zenith of success. Working capital loans are extremely popular in India, especially among small and medium sized business companies. Obtaining a capital loan is also not a tedious process if you have all the required documents handy. Banking institutions and financial institutions provide such loans with easy approval processes, both with short-term as well as long-term tenures
08-11-2023
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Home Loans vs Construction Loans: What’s the Difference?

Banks and financial institutions offer different types of home loans. Depending on the purpose behind the need for capital, the type of loan is determined. For instance, if you would like to purchase a home, a home loan would be recommended. In case you would like to construct your home on a piece of land that you have purchased, it is best to opt for a home construction loan In this article, we will dive deep into home loans and home construction loans. We will also understand the difference between them with a home loan comparison. [B-01] What Is a Home Loan? A home loan is essentially an agreement that is made between you and the lender to borrow a certain amount of money to purchase a home. You agree to repay the loan along with interest over a certain period of time that is agreed upon by both you and the lender. You can either opt for a fixed-rate mortgage or an adjustable-rate mortgage depending on what is offered by the lender. With a home loan, you also have the advantage of tax benefits under Section 80C of the Income Tax Act on your principal component. You can also leverage tax benefits on your interest under Section 24(b) of the Income Tax Act. What Is a Home Construction Loan? When it comes to a home construction loan, the lender offers to pay for the cost of constructing a new home through a home construction loan. You could either construct your home on a new piece of land or construct a part of your home within your existing property. This home construction loan will be offered at a certain interest rate for a particular period of time. You can choose the tenure of your construction loan depending on your financial repayment capacity. Your loan is secured as there is a mortgage on the property. There are many different types of construction loans such as the following: Construction-to-Permanent Loan: These loans are also referred to as single-close loans. They provide the funds that are required to build your permanent mortgage as well as your dwelling mortgage. Construction-Only Loan: With this loan, you can get the necessary funds to complete building your home. Renovation Loan: If you are planning to upgrade your existing home, you can avail of a renovation loan. Owner-Builder Construction Loan: This loan is a construction-only or a construction-to-permanent loan where the bank also acts in the capacity of the home builder. Home construction loans, as well, have tax benefits similar to home loans. Under Section 80C and 24(b) of the Income Tax Act, you can avail of benefits on your principal and your interest respectively. Difference Between Home Loans and Home Construction Loans When it comes to home loan vs construction loan, there are a few key parameters that vary. Let us have a look at the main differences between home loan and construction loan. 1. Term of the Loan: Construction loans are usually short term loans compared to home loans. The tenure offered for most construction loans is about one year or less. 2. Interest Rate: Most banks and lending institutions offer a similar rate of interest for both home loans and construction loans. However, since there is more risk involved with construction loans, some banks may charge a higher interest rate. 3. Disbursement: With construction loans, the loan amount is disbursed in phases as progress is made on the project. The lender keeps a close eye on the progress of the construction in contrast to home loans. 4. Down Payments: For a home loan, a very low down payment would be required. However, large down payments would be required for construction loans. [B-02] In a Nutshell Home loans and construction loans are availed for different purposes. There are a few key differences between home loans and construction loans such as the interest rate, down payments, disbursement, and tenure. If you are looking for a home loan or a construction loan, Piramal Finance can be your best choice.
08-11-2023
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