Project Manager at The Economic Times | Posted on
In India, buying a home is considered as one of life’s key milestones. As soon as somebody gets into a job, he/she wishes to buy a new house. Buying a house is an emotional necessity rather than a financial obligation in our country.
Is home loan a ‘debt—trap’
Some people have started calling home loan a ‘debt—trap’ because you end up paying nearly double the amount loan amount in 15-20 years. Let’s understand why they are also not wrong.
You plan to buy a house for Rs 45 Lakh, which is a decent cost for a 2BHK house in major cities in India. If you have a saving of Rs 15 lakh, which you have paid to the builder as down payment. Now, you are looking for a Rs 30 lakh loan, which will be repaying in 15 years at a rate of 8.55%.
Accordingly, your monthly EMIs would be Rs 30,000. If you do calculations based on these numbers you will end up paying a sum of nearly Rs 54 lakh in next 15 years, which means you have paid flat Rs 24 lakh on interest to the bank for helping you buy a property.
Some people consider it bad, while others believe that taking a loan is worth because by the time your loan tenure ends, appreciation in the property prices will subsume the high interest paid for it.
Not a trap
Debt is not a trap unless you make one. It is essential for a salaried to take home loan to acquire your own house. All you need is just a robust planning not to fall prey of marketing gimmick of easy loans and discounts. There is no such thing exist. Nobody pays from his pocket, if you wish to buy a property take a responsible and informed decision.
Plan you expenses versus the amount you will be shelling out on EMIs for the loan amount. You need to save some money from the income you currently have. Consider salary delay, loss of job and medical emergency as some of the immediate expenses you might have. Get a health cover for taking care of medical ones and keep some money intact for other emergencies. Additionally, work out other expenses as they can be subjective.
Do’s to avoid debt trap
1. Avoid over buying using a credit card
2. Don’t miss utility payments
3. Get yourself covered for medical emergencies
4. Keep some money for emergency
5. Keep a tab on your expenses
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Employee | Posted on
Hi, According to situations, most borrowers get into the debt trap by any means, it all comes when we don't have proper budget planning. So don't borrower extra cash than what you need and make a proper commitment when you avail a loan and get the loan from reliable lenders only.
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Financial Adviser | Posted on
Most of the people wont plan Before taking a Home loan to buy a house which leads to dipping into the debts. Making a proper plan before taking any loan can help them to clear it properly.
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