Mortgage loans v/s Personal Loans

While taking up a loan, we always have a dilemma whether to take up a Personal Loan or Mortgage Loan/ Loan against property. There is nothing like this loan is best, or this is not. According to the needs and requirements of the customers, the best can be decided.

Generally, Personal Loans are often known as unsecured loans as there is no involvement of guarantor while taking up a Personal Loan. As such, a high risk is involved because the loan disbursal on purely on the basis of conviction, the interest rates involved are higher than the other types of Loans.  Generally, people prefer Personal loans when they want to buy any household commodity, or they want to go to any Personal trip. The best benefit of a personal loan is you can get it immediately in case of an emergency and you are short of cash. On the basis of your eligibility, you can get a good personal loan amount. The duration for repayment of personal loans is lesser than other loan. You can say it, that it is a short term loan.

A loan against any collateral, such as property is known as a mortgage loan. This is the most secured form of loan available in India. The interest rates in this Loan against property is also low as compared to other loans. As, most of the Indian population comes from a rural area, the loan against property is a good thing for them.  A full fledged agreement is made between the borrowers, the lender and the third party involved, if any. You should take these types of loan keeping in mind the fact that it has been taken for the purpose of some very important things such as Education of children, medical treatments etc. The benefit of Loan against Property is that it is a low interest rate loan and gives you tax benefits also.

Does personal loan give Income tax benefits?

For any Personal loan, the interest paid is for the most part not deductible. However if the loan is used in obtaining any income which you are unveiling in your Return of Income and in a position to legitimately identify the loan with gaining that income, then the interest and different expenses might be guaranteed as a deduction.  There is no other method of benefiting from personal loan under the Indian Income tax law of 1961 as changed till date.

                   Assuming that you have taken a personal loan from a bank, housing finance company, Life Insurance Corporation of India or from an employer and used the cash for purchase or construction of a house, you can assert IT profits for both principal and interest paid.  But in the event that you have taken a loan from a friend or relative, and then you can assert tax reductions on the interest paid justly. In any case, provided that you have taken a loan for renovation of your house building, then you can claim reasoning up to Rs.30, 000 a year of the interest paid.

Normally such Personal loans have to be arranged in such a manner, that some origin of income gets tagged. Loans for particular utilization or family matters are not entitled to Income tax concessions. Also loan for marriage, education, traveling and do not get such concessions. Usually, a few organizations like ICICI, HDFC and LIC make loans for Housing and vehicle necessities. They also do not usually provide loans for different purposes to salaried individuals since they can lay their substantial hands effectively and rapidly in the event of default on these possessions and recuperate their giving.