Taking home loan is a very tedious process. Banks asks for a lot of documents from you. Checks your credit history. From your job to the bathroom, everything is scrutinized. Even then there is no guarantee that the bank will give you a loan. If a bank agrees to give you a loan after pity, then interest is charged more than you.
But do not be disappointed, it is not necessary that you take a home loan from the bank to buy a house, there are other ways. If your parents, friends or relatives are financially competent, then you can take home loan from them also. It has many benefits.
Benefits of taking home loan from family and friends
1. You avoid the long paperwork of the banks, which makes the home loan process complete quickly
2. You get a loan from the banks at a lower interest because the interest rates are negotiated between the borrower and the lender. Are fixed.
3. Your family or friends know you better, so they do not check your credit history, job or personal information.
4. How long do you want the loan, you can decide both by negotiation. In this, both parties are flexible.
5. Even if there is a slight delay in repaying the loan, your family or friends will give you an extension, not take any action on you.
6. There are not as strict conditions like banks for home loans.
How to take home loan from family and friends
Now the question arises that what is the process of taking home loan from family or friends. Can a home loan be taken only by talking to them? So the answer is yes. There is no need to make any agreement for this. It is better that whenever you take a home loan from a family member, take help of a legal expert. Keeping this very privately can lead to a dispute going forward, which can be difficult to resolve.
Tax benefits on home loan
For your information, tell us that there are two types of tax benefits on home loans. The deduction of Rs 1.5 lakh per annum is given under the section 80C on the principal amount of the first loan. The interest on the second loan gets a rebate of up to Rs 2 lakh under section 24. Now, under Section 80C of Income Tax, exemption is available only when you take loans from banks, you will not get this exemption on taking loans from family. That is, you cannot claim tax exemption of Rs 1.5 lakh under 8OC.
suppose that you took a loan of 20 lakhs from a family member, which is to be repaid in 20 years. Interest fixed at 6%. In this way, the monthly EMI became Rs 14,329. The annual interest on this is Rs 1,18,547 and the annual principal will be Rs 53,396.
Loan Amount 20 Lakh
Term 20 years
Annual interest 1,18,547 (section 24)
Annually Principal 53,396 (section 80C)
You will get a rebate under section 24 on the annual interest of 1,18,547. But you will not get any tax exemption on the Principal 53,396 annually. One more thing, you can take loans from friends and family for the re-construction and repair of the house too, on this you also get tax exemption but only Rs 30,000.
you get tax rebate? You will get a rebate of 2 lakh rupees only on interest. Now the question arises how to get exemption under section 24. For this, any family member or friend from whom you have taken a home loan, issues a certificate to you. In which it is mentioned that how much interest you paid during the year. You have to show this certificate as proof while taking income tax exemption.