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How are Home Loans Preferable Over Cash Payments?

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Arwind SharmaThe choice of deciding the home of your dreams must not be the one you make in haste. A lot of research and thinking is put into searching for a home. Many times, a decision was taken in haste proves to be dreadful in the long run. You don’t want to fall prey to the same. People nowadays fall into a think tank when it comes to the payment procedure of a home they want to purchase. Should it be a cash payment? Should it be a Home Loan? These are the two important questions that linger in the minds of the buyer.There are several aspects that need to be considered in Cash Payment v/s Home Loan. They both have their pros and cons and thus analysis of the same will help us get a better understanding of the same. We shall study the advantage and disadvantage of each one of them to see which option is the best one – Using your savings for your home purchase or borrowing a Home Loan from the bank?Advantages of Cash Payment:When you are making a cash payment nobody will ask you about your credit history. You simply aren’t answerable to anyone as you decide to use your lifelong savings to buy the home. Savings are risk-free. Savings are the amounts made up over the course of years and decades. Savings are risk-free. There is no leveraging in cash payment. You’re the sole owner and there are no leverages. With cash payment, you also have the chance to get a discounted amount as the amount is being paid in cash. Finally, you aren’t indebted to anyone. Thus you are stress-free when it comes to the ownership of the home and its dues. Those are rest-assured. Advantages of Home Loan:There’s a sense of accomplishment in Home Loans. It’s strange but it’s true. Banks help you achieve your dreams through Home Loans. You can not only buy but even furnish the home of your dreams with Home Loans. Moreover one can avail tax benefit with the help of a Home Loan. A bank loan will help you increase your liquidity. Thus these are basic advantages of Cash Payment v/s Home Loan. Let’s discuss the disadvantages now:Disadvantages of Cash Payment:There is low liquidity. A compromise is a must when it comes to cash payments. For instance, if you want to buy a house along with a car and the assets have been liquidated you will be required to compromise now. You aren’t leveraged in terms of cash payments. Under cash payments, real estate is not easily convertible. These are the disadvantages of cash payment. Moreover paying with cash rules out the other form of investment. Disadvantages of Home Loans:The amount of rate of interest charged is stressful. The tenure for which you are required to pay the loan is long. You are more likely to fail in case your ability to repay the loan is hindering. Mortgage approval is not realistic for many of us as we do not possess ample amount of property or assets. Thus these were the advantages as well the disadvantages of Cash Payment v/s Home Loan. You can decide which one is better based on Pros and Cons Cash Payment v/s Home Loan. We can say that there are noticeable benefits in both of them. And the number of drawbacks are less as compared to the advantages. Thus housing sector is ultimately the beneficiary in the Cash Payment v/s Home Loan discussion.

Arwind Sharma is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has worked extensively in the finance sector and has been dealing with the entire range of investment and finance. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management. Arwind has also amassed a great name for himself as a financial blogger. He has written numerous pieces on the Financial topic like

Home Loans

, Fixed Deposit, Personal Loans, CIBIL score, etc.

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