Loan Benefits

 

What is a loan?

In any agreement to borrow money, it must be clearly stated that the borrower is expected to pay back the amount loaned by a specific date, plus any applicable interest.

Why do people take a loan?

A loan has something for everyone; the best handler receives an award, while those who cannot handle receive pain and their lives are turned upside down.

But for normal people, it is a bad thing, it frightens them, but for those who could handle it, it's a blessing for them.

People generally take out loans to fulfill their dreams and needs or for business.

What is the loan benefit?

There are a lot of benefits to a loan, but remember, I will explain the simplest one with an example.

You know that inflation is the thing that helps you burn through your money over time.

Now go to our example.

If you put your money in a savings bank, then your money grows at 3% interest, and now inflation is 6%.

Now consider how a hundred rupees travels over a year.

It increased to 103 after a year in the bank.

but when the product cost increases by 6% due to inflation, then the value of 103 reduces to 97 in real terms.

If you're still confused,

This example will help you

Let us buy rice at 100 per kg.

but when the inflation is 6%, then that same rice will cost you 106 rupees, which means you have to pay 6 rupees more than last year.

Now see how a businessman takes advantage of it.

A shopkeeper buys 1 kg of rice for 100 rupees.

Another shopkeeper takes a 100-rupee loan with 9% interest.

After one year, when the inflation increased, the price rate increased to 106 rupees 

At 112 rs per kg, the shopkeeper makes a six-rupee profit.

The shopkeeper who invests the money makes a profit of 6 rupees.

However, the shopkeeper who takes out the loan receives 3 Rs after paying the interest amount; he obtained that money without investing his own money.

So when inflation increases, cash holders lose money and borrow with assets to gain money.

Always remember: If you take a loan, you must take it for an asset that has produced more money than your interest. Only then can you benefit from the loan.

Rich people love loans because it give them tax-free money.

Now let us know.

Different types of loans

1. Home loan
2. Personal loan
3. Education loan
4. Vehicle loan
5. Gold loan
6. Loan against an asset
7. Lifestyle-Loan
8. Business loan
9. Loan against security

Home Loan Benefits

• Section 24(b) exempts interest up to Rs. 2 lakhs and capital up to Rs. 150000 from tax under Section 80(c).
• Both the co-applicant and the applicant get a tax exemption.
• Both the landowner and the payer got tax relaxation.
• female applicant benefits with less interest and additional tax exemption up to Rs. 1.5 lakhs on interest payments

• overdraft:

which helps you pay the loan faster and pay less interest only if you have surplus money in your account.

• top-up benefit

It is a loan on your home loan whose interest rate is equal to the home loan.

which has less interest than a personal loan.

Personal loan benefits

• There is no need to provide collateral against the loan.
• easy and with less documentation
• They can pay you for emergency expenses without any collateral.
• It helps you build your credit score.
• It is less expensive than credit card interest.
• If you use it as a business, it can provide tax relief on interest.

Education loan benefits

• Under section 80E of the income tax code, you can save tax on an education loan.

How much can you deduct under 80 (E)?

The benefit can be available for a maximum of 8 years or until the interest is paid, whichever is earlier.

• Only the taxpayer who applied for the loan can claim the deduction.
• Interest paid on the loan can be eligible for an 80(e) deduction.

Example;

Ram is a regular job holder, and his 19-year-old son Sanjay is ready to pursue engineering from a reputed college, so he took an education loan of 10 lakhs to fund Sanjay's education. Ram takes a loan period of 7 years, and during this duration, he can claim a deduction of interest on the education loan taken under Section 80(E).

"Car Loan Benefit" is an abbreviation for "Vehicle Loan Benefit."

• If you are a self-employed professional or businessman and use the car for business purposes, it can be a new car loan, a used car loan, or a loan against a car.

Points to remember

To claim a tax deduction, you must use the car for business purposes.

• The officer has the authority to block deductions if they don't meet their standards

• The car must be registered in the name of the business or business owner.

• When you buy a vehicle on loan, it comes with first-party insurance that covers theft. Remember to keep paying the EMI until the claim is settled or the amount is due after settlement.

Gold Loan Benefits

• lowest interest rate
• faster processing
• option to pay interest
• Income proof is not required.
• Credit scores are not required.
• safety of your pledged gold
• Section 80C of the ITA 1961 provides for tax examination.
• Gold loans are more flexible than personal loans.

A loan against asset benefits.

• obtain a large amount of loan
• As it is a secured loan, it has a lower interest rate.
• You can pay over a long tenure.
• tax benefits on interest payments

Section 37(1) of the Income Tax Act of 1961 allows you to get a tax deduction if you take the loan against property for business purposes by claiming it as business expenses.

Under Section 24(B), you can get a deduction of up to Rs 2 lakh, but you have to provide proof of your expenses because you have to spend that fund on purchases, construction, repairs, renewals, or reconstruction of residential property.

 

Lifestyle-Loan Benefits

A small hole in a boat can sink it, just like that lifestyle loan is just like that small hole in a boat. You must not use this loan, but it has a benefit.

• It helps you improve your credit score if—and only if—you pay it on time.

Business loan benefits

• Tax benefits
• improve business credit
• reasonable interest rate
• multiple loan options
• no sharing profit 
• flexible repayment

Loan against security: benefits

• super-fast processing
•  flexible repayment
• reasonable interest rate
• There is no prepayment penalty.
• Credit scores are not required.
• Income proof is not required.

The last word

Before taking out a loan, make sure to do your research and weigh the pros and cons of doing so. Find out the interest rate, repayment terms, and if there are any hidden fees. Additionally, never borrow more than you can afford to pay back in the given period. Last but not least, it is important to develop a budget and stick to it, as it will help you manage your finances and avoid unnecessary debt.

A loan is a tool if you use it well; the benefits will amaze you, but it is the cause of much pain, so beware of things you do in your life that will lead you in the right direction.

thank you.