Ten years ago, I bought a property. I am paying an equated monthly instalment of Rs 40,000. Our monthly take-home pay is Rs 1.5 lakh. I want to invest in another property worth Rs 80 lakh, and will need a home loan of Rs 65 lakh. Do you think it makes sense?
Ideally, such a decision can be taken only after considering your age profile, monthly liabilities, savings after the down payment, your plans to rent out one flat, future income and extending the family.
Prima facie, considering you have a repayment period of 20 years on the new loan, your combined EMI would be Rs 1.03 lakh. You will be left with Rs 50,000 every month for your living expenses. Also, you may earn a rental income, in which case you can claim a deduction on your income up to 100 per cent of the interest paid, and 30 per cent of the annual rental income towards repair and maintenance of the house. The rental income and tax benefits provide an extra cushion, making the proposal worth considering.
However, keeping the second house vacant can have a negative tax implication. According to the income tax guidelines, it will be treated as ‘deemed to be let out’ and its ‘deemed income’ will be added to your taxable income. It may increase your tax liability.
You should speak to your tax consultant. I am sure you will retain some savings for emergencies, and have considered an increase in income in future for meeting your increased expenses, and growth in family size.
I am 35 years, with two dependents. This festive season, I bought an LED television for Rs 80,000 on my credit card. I was planning to pay the loan in the next six months. But due to a family emergency, I had to spend another Rs 1 lakh on the card. My monthly take-home salary is Rs 80,000, while my family’s expenditure is Rs 50,000. Does it make sense to take a personal loan to retire the total debt of Rs 1.8 lakh?
Yes, credit card debt is the most expensive one, and the interest rates can exceed 40 per cent per annum, apart from other charges. Take a personal loan for five years. It should be available at an interest of 15-16 per cent a year, giving you a monthly EMI of Rs 4,500, which is within your paying capacity.
I invest my monthly surplus aggressively. Consequently, I hold very little cash in hand. Recently, I got a credit card and spent Rs 1 lakh through it. My investments are goal-specific, and so, I do not want to liquidate them. Do you think taking a personal loan will help?
You have not mentioned about the returns on your investments. Strictly in financial terms, personal loans are available at 15-16 per cent a year interest rate. Compared to these, if your investments fetch lower returns, you should liquidate them to pay off the dues. If they fetch higher returns, you must take a personal loan. But taking another loan to repay an old one is not prudent, unless there is no alternative. You should consider repaying from your savings.
Lesson: While a credit card is a convenience, it must be used judiciously. It should not be used as a tool to obtain credit under normal circumstances.
The writer is senior vice-president and group head (retail strategy and branding) at Arcil. Send your queries to yourmoney@bsmail.in
