Loan Management Guide
Complete guide to managing your loans effectively in India. Learn about EMI, prepayment strategies, tax benefits, and more.
Pro Tip
Always maintain an emergency fund of 6 months' expenses before aggressively prepaying loans. This ensures you don't need to take high-interest personal loans in case of emergencies.
Frequently Asked Questions
What is the maximum home loan I can get in India?
Banks typically offer up to 80-90% of property value as loan. The amount depends on your income, age, credit score, and existing obligations. Maximum loan amount = (Monthly Income × 60) - Existing EMIs. For example, if your monthly income is ₹1 lakh and you have no existing loans, you can get approximately ₹60 lakh home loan.
Should I choose fixed or floating interest rate?
Floating rates are generally 1-2.5% lower than fixed rates and beneficial when RBI is cutting rates. Fixed rates provide stability and are good when rates are expected to rise. In India, 90% of home loans are on floating rates. You can also opt for a hybrid loan with fixed rate for initial 2-3 years, then floating.
Can I claim tax benefits on home loan for rented property?
Yes! You can claim full interest paid (no ₹2 lakh limit) under Section 24(b) if the property is rented out. You can also claim principal repayment under Section 80C up to ₹1.5 lakh. The rental income will be taxable, but you can deduct 30% as standard deduction for maintenance.
What happens if I miss an EMI payment?
Missing one EMI: Late payment charges (2-4% of EMI) + negative impact on credit score. Missing 3+ EMIs: Loan becomes NPA (Non-Performing Asset), legal notice sent, credit score drops significantly (by 50-100 points). Missing 6+ EMIs: Bank can auction the property. Always inform bank in advance if facing difficulty - they may offer moratorium or restructuring.
Is loan insurance mandatory in India?
No, loan insurance is not mandatory by law. However, banks strongly recommend it and may offer better rates if you take it. Home loan insurance costs 0.3-0.5% of loan amount annually. It ensures loan is repaid if borrower dies or becomes disabled. Consider term insurance instead - it is cheaper and provides better coverage.
Can I transfer my home loan to another bank?
Yes, balance transfer is allowed and can save significant money if you get 0.5%+ lower rate. Process: Apply to new bank → Get sanction letter → Pay processing fee (0.5-1%) → Old bank releases documents → New bank disburses amount to old bank. Check for: prepayment charges on old loan, processing fees, legal charges, and lock-in period on new loan.