Owning a home is a dream for everyone. Everyone visualizes their dream home be it a flat, row house, or a luxurious bungalow. While in metro cities, the apartment is the only option available for the vast majority of the people considering already skyrocketed land value, but in Tier-II or Tier-III cities, or towns and villages, bungalows are still common. Therefore, here comes the question of whether loans taken to purchase a plot for constructing a home are different from a home loan? Read along to know your answer.
Whether plot loans and home loans are different?
Yes! Plot loans are different from home loans. Both cater to different purposes and therefore their terms are also different. While the home loan is for purchase or construction of your home, plot loans are specifically available to purchase a plot, most probably for residential purposes and it is restricted for that purpose only. Whereas, a home loan can be used for either purchase or construction of an apartment, bungalow, or any other residential unit. The difference in their terms are as follows:
|Parameters||Home Loan||Plot Loan|
|Interest Rate||Home loan interest rates start from 6.70% p.a.||Plot loan interest rates start from 7.50% p.a.|
|Tenure||Can be availed for up to 30 years||Can be availed for a maximum of up to 15 years|
|Loan to Value Ratio||The loan amount sanctioned can go up to 70% to 95% of the property value||The loan amount sanctioned can go up to 70% of the property value|
|Taxation benefits||Deduction under Income Tax Act, 1961 is available for both interest and principal repayment. The deduction can be claimed for each year for which the loan is repaid.||Deduction under Income Tax Act, 1961 is available only upon taking a loan for the construction of a home on that plot.|
|Income Eligibility||Ranges between 40% to 55% of the applicant’s income||Ranges between 30% to 40% of the applicant’s income.|
These were the basic differences that you may witness between the home loan and plot loans.
Home Loan Eligibility
While the home loan eligibility criteria differ among all the lenders, some of the common eligibility criteria for home loans include the following:
- Age: The age of the borrower should be between 24 years to 65 years. In other words, your loan should be fully repaid before you attain 65 years of age.
- CIBIL: A good CIBIL score is preferable for availing of a home loan. CIBIL score above 700-750 is preferable.
- Occupation: The borrower should be either a self-employed individual or a salaried person.
The eligibility criteria may vary according to the profile of the borrower.
Home Loan EMI Calculator
The home loan EMI calculator is a great tool to preplan your budget before applying for a home loan. As the home loan creates a fixed monthly obligation in terms of EMI payments, therefore it becomes important to allocate a specific amount from your monthly budget towards the EMI payments. With the home loan EMI calculator, you can calculate the exact amount of EMI that you will require to pay by just inserting the loan amount, home loan interest rates, and the tenure of the loan.
If you are willing to purchase or construct your dream house shortly, then home loans and plot loans will take care of your financial requirements. Home loans are usually more beneficial and affordable concerning the terms and eligibility as compared to the plot loans. Apply Now and fulfill your dream of owning a house.