*Should I Take LOAN ?
Have you ever asked yourself or any professional “Should I Take a Loan?”
Have you ever asked yourself that “Am I doing it Right” before swapping
your credit card.
Have you ever told your wife “I don’t think we should buy this on Loan”
while shopping for a Washing Machine or TV.
If your answer is NO go ahead and read this article.
If you think loans are difficult to get believe me, creditors love giving
loans. It is a big business after all. Be it the bank or a private
financier, the interest they earn from your loans is what keeps them
running. The more loans you take, the happier you are, but you are also
making them profitable. And make no mistake about this either as long as
you are in debt, you will never attain financial freedom.
Indians have just developed a tendency of getting into debt.
The most common kind is credit card debt. Credit card was made to ease you
to carry bundles of notes. But many of us use it as an EMI solution.
This is simply;buy now and worry later philosophy. That is the easiest way
of ruining your financial freedom. Credit cards should be used not as a
source of credit, but just a convenience that saves you from having to
carry cash.
Spend only what you can pay off immediately or before the due date. The
focus should be on retiring the balance that has accumulated on your card
as soon as possible. At 30 per cent plus a year interest rate, this is the
worst kind of debt possible. And that is the reason every bank or financier
is behind you to take a credit card.
However not all debt is bad, there is good debt as well. Good debt is used
to create productive and long-term assets or to increase one’s income
generating capabilities. So a home loan, loan to buy land, education loan
and loan to set up a business would fall under the ‘good debt’ category.
Here maximum one can do is to evaluate and go for the option which is less
costly. And cost is the interest charges that one pays. The simple way to
evaluate is to compare the EMIs of different loan providers. Just remember
that for comparison the loan amount and the tenure of repayments should be
same. With the loan amount, also compare the processing fees. It ranges
from 1% to 4%.
This is also a part which can be negotiated.
Now days, debt repayment is basically your credit-character certificate. If
you have chosen to take a debt, it is equally very important to repay in
the disciplined manner. Any overdue, late charge penalty will spoil your
ability to take further loans. The data of loaners is centralized by the
CIBIL (Credit Information Bureau (INDIA) Limited) and before you apply for
next
loan or credit card the financier checks your responses to the loans taken
earlier.
Lot of times when one starts earning, people accumulate credit
card overdue and this default keeps on reflecting in your CIBIL report. And
than in your serious days, when you have actually made up your mind to buy
a dream home or a car, the bank refuses to give you a loan until you clear
your credit.
Debt is like Mount Everest, difficult to climb and even tougher to come
back. While getting out of any debt is vitally important, it is even more
important for bad debts. When one is servicing multiple loans, the costlier
one should be settled sooner. So credit card dues should be paid first
followed by personal loan, car loan and housing loan.
Another thing that should be kept in mind is the tax implication. Certain
loans, a home loan, for example, would avail tax benefits for the principal
paid under Section 80C and for the interest repayment under Sec 24* of the
Income Tax Act. Hence, when faced with two loans, first settle the one
which has higher interest rates and doesn’t provide any benefits.
Of course, the best way of avoiding debts is to not get into any. But
modern lifestyle directs you towards it. While some loans might not be
avoidable, a lot are. Use a strong justification while getting into more
loans and always maintain a fact that you will not go overboard as more
debt means more sacrifices in terms of money, in your present lifestyle.*
* Section 24. DEDUCTIONS FROM INCOME FROM HOUSE PROPERTY.
*(1) Income chargeable under the head "Income from house property" shall,
subject to the provisions of sub-section (2), be computed after making the
following deductions, namely :- *
* *
* *
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*(i) In respect of repairs of, and collection of rent from, the property, a
sum equal to one-fourth of the annual value; *
* *
* *
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*(ii) The amount of any premium paid to insure the property against risk of
damage or destruction; *
* *
* *
* *
*(iv) Where the property is subject to an annual charge, (not being a
charge created by the assessee voluntarily or a capital charge), the amount
of such charge; *
* *
* *
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*(v) Where the property is subject to a ground rent, the amount of such
ground rent; *
* *
* *
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*(vi) Where the property has been acquired, constructed, repaired, renewed
or reconstructed with borrowed capital, the amount of any interest payable
on such capital; *
* *
* *
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*Explanation : Where the property has been acquired or constructed with
borrowed capital, the interest, if any, payable on such capital for the
period prior to the previous year in which the property has been acquired
or constructed, as reduced by any part thereof allowed as a deduction under
any other provision of this Act, shall be deducted under this clause in
equal instalments for the said previous year and for each of the four
immediately succeeding previous years; *
* *
* *
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*(vii) Any sums paid on account of land revenue or any other tax levied by
the State Government in respect of the property; *
* *
* *
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*(ix) Where the property is let and was vacant during a part of the year,
that part of the annual value which is proportionate to the period during
which the property is wholly unoccupied or, where the property is let out
in parts, that portion of the annual value appropriate to any vacant part,
which is proportionate to the period during which such part is wholly
unoccupied.*
* *
* *
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*Explanation : The deduction under this clause shall be made irrespective
of whether the period during which the property or, as the case may be,
part of the property was vacant precedes or follows the period during which
it is let; *
* *
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*(x) Subject to such rules 421 as may be made in this behalf, the amount in
respect of rent from property let to a tenant which the assessee cannot
realise. *
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*(2) No deduction shall be allowed under sub-section (1) In respect of
property of the nature referred to in sub-clause (i) of clause (a) of
sub-section (2), or sub-section (3) of section 23 : *
* *
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*Provided that nothing in this sub-section shall apply to the allowance of
a deduction under clause (vi) of sub-section (1) of an amount not exceeding
thirty thousand rupees in respect of the property of the nature referred to
in sub-clause (i) of clause (a) of sub-section (2) of section 23 or
sub-section (3) of section 23. *
* *
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*Provided further that where the property is acquired or constructed with
capital borrowed on or after the 1st day of April, 1999 and such
acquisition or construction is completed before the 1st day of April, 2001,
the provisions of the first proviso shall have effect as if for the words
"thirty thousand rupees", the words "seventy-five thousand rupees" had been
substituted. *
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*(3) The total amount deductible under sub-section (1) in respect of
property of the nature referred to in sub-clause (ii) of clause (a) of
sub-section (2) of section 23 shall not exceed the annual value of the
property as determined under that section. *
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* Bigger the ambitions,
*
*greater will be the issues!!
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*V a n a k k a m S u b b u *
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*வாழிய செந்தமிழ்! வாழ்க நற்றமிழர்!
**வாழிய பாரதமணித் திருநாடு!*
