Common questions on loans and EMIs — home loan tax benefits, prepayment, interest types and more — answered by a practising CA.
Loans & EMIIs interest on an education loan tax-deductible?Bottom line: Yes — Section 80E allows the full interest on an education loan as a deduction, with no cap, for up to 8 years. 1. What The…Loans & EMIWhat credit score do I need for a home or business loan?Bottom line: A CIBIL score of 750 or above is generally preferred, on a scale of 300 to 900. 1. The range 300 to 900 — a higher…Loans & EMIWhen is a home-loan balance transfer worth it?Bottom line: A balance transfer is worth it when the interest saved beats the switching costs — usually early in the tenure. 1. What You move the outstanding…Loans & EMIWhat is a moratorium (EMI holiday) and how does interest accrue?Bottom line: A moratorium pauses your EMIs, but interest keeps accruing and is added to the balance, raising the total cost. 1. The pause You stop paying for…Loans & EMIWhat is a top-up loan and how is it taxed?Bottom line: A top-up loan adds to your home loan, and tax benefits apply only if the money is used for the house. 1. Purchase or construction Interest…Loans & EMIHow is EMI calculated and how does tenure affect it?Bottom line: EMI is a level monthly payment; a longer tenure lowers the EMI but raises the total interest. 1. The formula EMI = P × r ×…Loans & EMIWhat are the tax benefits on a home loan?Bottom line: Under the old regime, you can claim up to ₹2 lakh of interest and ₹1.5 lakh of principal a year. 1. Interest (Section 24b) Up to…Loans & EMIShould I prepay my home loan or invest?Bottom line: Compare the post-tax cost of your loan with the return you expect from investing — the higher one wins. 1. Loan side If your interest gives…Loans & EMIWhat is a loan against property and how much can I borrow?Bottom line: A loan against property is a secured loan, and lenders typically fund 50 to 70% of the property's value. 1. How it works You pledge a…Loans & EMIWhat is the difference between flat and reducing-balance interest?Bottom line: A flat rate charges interest on the full principal throughout, so it costs much more than a reducing-balance rate. 1. Flat rate Interest is on the…