Home Loan Tax Benefits – How much do You Really get?

In India, home loans come with tax benefits. You already know that.

And there is no denying that these tax benefits make it all the more attractive to buy property using home loans.

But time and again I have seen people overestimating these tax benefits. Why?

Because the tax benefits available on home loans are capped. So depending on the home loan they take, the actual benefit may not be as large as what many borrowers think.

Now there are 2 components of a home loan – principal and interest. And the home loan EMI also has the same two components – (i) principal repayment, and (ii) interest payment.

So what tax benefits are available for Home Loan borrowers that can reduce their tax outgo?

  • Deduction of up to Rs 1.5 lac for principal repayment under Section 80C of the Income Tax Act.
  • Deduction of up to Rs 2 lac for interest payment for self-occupied property under Section 24 of the Income Tax Act. The interest payment of up to Rs 2 lac is available as loss under income from a let out property
  • Additional deduction of Rs 50,000 on interest payment, over and above the deduction claimed in Section 24 is available for the first time home buyers under Section 80EE.

Tax Benefits on Home Loan Principal Repayment

A deduction of up to Rs 1.5 lac is available for principal repayment of home loans under Section 80C of the Income Tax Act.

There are few things to note here.

First, Section 80C’s tax savings are also applicable on your investments in EPF, PPF, ELSS (Equity Linked Savings Scheme) and expenses like insurance premiums, school fee, etc.

So all these investments and expenses compete with home loan principal repayment for the Section 80C benefits. Chances are high that the sum of EPF + PPF + ELSS + insurance premiums + Home Loan Principal repaid will be higher than Rs 1.5 lac. If that’s the case, the cap of Rs 1.5 lac in Section 80C limits the benefit to just Rs 1.5 lac irrespective of what you claim from within EPF, PPF, ELSS, premiums or home loan principal repayments.

Even if you have a big loan and are repaying more than Rs 1.5 lac of home loan principal, the tax benefit is limited to just Rs 1.5 lac.

Tax Benefits on Home Loan Interest Payment

Deduction of up to Rs 2 lac is available for interest payment for self-occupied property under Section 24 of the Income Tax Act. And the interest payment of up to Rs 2 lac is available as a loss under income from a let out property.

This is where things get interesting and people get confused.

Due to the above-mentioned capping of benefit, even if you are paying more than Rs 2 lac interest in a given financial year, the excess interest above Rs 2 lac will not fetch you any tax benefits.

Here is a small example:

Suppose you take a Rs 35 lac home loan for 20 years at 9.5%. You EMI will be Rs 32,625 per month (read more about how home loan tenure impacts interest paid).

Home Loan Tax benefit Section 24

As you can see, in total Rs 3.91 lac is paid in EMIs in 1st year. Out of this, principal forms only Rs 61,633 whereas interest is Rs 3.29 lac. Out of this Rs 3.29 lac, only Rs 2 lac is eligible for tax benefits under Section 24. The remaining amount (can be seen in red-colored text) cannot get tax benefits.

The home loans are structured like this that during initial years, a major part of your EMI goes towards interest payment. So it’s possible that the interest you pay in the initial years will be much higher than Rs 2 lac (the limit for tax benefit).

Let’s take another example to find out another interesting aspect.

We compare two loans. First of Rs 25 lac and the second of Rs 50 lac. The loan tenure and interest rate on both are 20 years and 9.5% respectively. The EMIs are Rs 23,303 (for Rs 25 lac home loan) and Rs 46,607 (for Rs 50 lac home loan).

Now have a look at the table below:

Home Loan Tax benefit comparison Section 80 Section 24

For the Rs 25 lac loan, the interest part that misses out on tax benefit is very small (Rs 35,616 in the first year and goes on reducing). But for the Rs 50 lac loan, you initially pay Rs 4.71 lac as interest in the first year. This is much more than the Rs 2 lac per year limit. So you only get the tax benefit on Rs 2 lac of interest (under Section 24). The remaining Rs 2.71 lac doesn’t get any tax benefit.

And if you focus on the table (on right) of Rs 50 lac loan, you will see that you keep having an interest component that misses out on tax benefits till the 15th year. And more interestingly, during the first 7 years of loan repayment, the tax benefit on interest payment of Rs 25 lac loan is the same as tax benefit on Rs 50 lac loan!

So much so and hue and cry for home loan tax benefits. 🙂

This is all the more reason why one needs to look at the tax angle when planning to prepay home loans. And if that wasn’t enough, there is also the dilemma of whether to invest vs prepay home loan – to benefit from higher returns elsewhere as compared to low post-tax home loan interest rates that are prevalent in India.

But I suggest that before you decide to prepay your home loan, you run your own numbers or get in touch with an investment advisor to help you out.

And if you are one among those who are still deciding whether to take a home loan or not, then I suggest that even before you begin your search for home loans online, some time should be spent to understand how home loans actually work and how best you can manage home loans once you take them.

The idea of doing this post was to highlight that at times, people get over excited when it comes to tax benefits from their home loans.

It is quite possible that you may not even get as much tax benefit as you thought you would be getting from your home loan.

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Choosing & Managing a Home Loan Wisely

I was talking to a friend recently who was planning to buy a house.

No, I did not convince him to continue staying on rent. 🙂 His life, his decision and who am I to tell people about their big decisions.

Nevertheless, we got discussing home loans and how the loan repayment works.

I was surprised to see that he had some misconceptions about the loan EMIs. Essentially, home loan EMIs are made up of 2 parts – the principal amount and the interest on the principal amount divided across each month in the loan tenure. He wrongly assumed that equal parts of the principal and interest are paid to the lender every month. This isn’t correct.

Have a look at the following loan repayment table below and then we discuss:

Home loan EMI interest principal

As is evident from the above, the interest component paid is higher during the initial years. During the latter years, the principal component is higher. With each passing month’s EMI, the interest paid decreases and the principal repaid increases. Many people know this. And many (like my friend) don’t know it.

So don’t think that if it’s a 25-year loan, then you would have paid back half your loan in 12-13 years. The actual amount you have repaid would be about 23-24% only.

If you have a home loan, just ask your lender for the home loan amortization table. It will indicate what exactly is your outstanding home loan amount at any point in time. Or you can easily get a quick idea of the same using online loan amortization table calculators.

Choosing a Home Loan

This is a very generic question. What I mean here is that after you have finalized the house you want to buy, how do you decide on the home loan amount, loan tenor, loan EMI, loan interest rate, etc.

Let’s see what all points you should consider when finalizing the home loan. And I will try to make this very simple:

  • Lenders expect you to bring in about 15-20% of the cost as down payment. But I feel that a larger down payment (like maybe 30%) can also be considered. This means that you take a home loan equal to about 70% of the cost.
  • Loan tenor and EMI are linked. Longer the loan tenor, smaller the EMI. Shorter the loan tenor, higher the EMI. What you need to understand is that lenders will give you a loan so that the EMI is maximum of about 40-45% of your income. Now let’s say you earn about Rs 1 lac per month. So your loan EMI can be Rs 40-42,000. Now you wish to take a loan of Rs 50 lac. And you want to keep a short tenor of 15 years. But for that, the EMI works out to be about Rs 50-51,000 – which is more than what lender would allow your EMI to be. But if you increase the loan tenor to 25 years, the EMI for the same loan amount comes down to Rs 41-42,000 – which fits into lender’s criteria for you. But longer tenor also means higher total interest payout. So at times, you need to change your tenor to fit your EMI budget (self-affordability or lender-mandated) even if it means higher interest. I have written in detail about the dynamics or loan interest, EMI and tenor at How shorter home loan tenor can save you lacs?
  • But all said and done, I think limiting loan* EMIs to 40-50% of income is max that you should go. As you need money for regular expenses and saving for other goals too. (*for all loans and not just home loan)

Managing a Home Loan

The home loan has been taken.

Now comes the difficult part. Paying it back. 🙂

And for all normal people like us, loans are fairly predictable and have to be paid back on time. Some are lucky who don’t need to pay back their loans. 😉

Nevertheless, managing home loan is important.

Ideally, you would want to close it soon, pay as low interest as possible and if possible, invest elsewhere too as effective after-tax home loan rates are pretty low.

But at times, people get too influenced by tax saving and don’t think through clearly. And then there are others who have an obsession with loan repayment and early closure. They end up taking a holiday from investing when repaying a loan and that can be very harmful.

But let’s handle one thing at a time. Let’s first revise the tax benefits available for home loan borrowers:

  1. Up to Rs 1.5 lac deduction allowed for principal repayment under Section 80C of the Income Tax Act. Unfortunately, this deduction is also applicable to other things like EPF contributions, insurance premiums, tuition fees, etc.
  2. Up to Rs 2 lac for interest payment for a self-occupied property under Section 24 of the Income Tax Act. For a property that is let-out or deemed to be let-out, there is no cap on tax benefit available against interest payment.

Do you remember what we discussed little earlier about % of EMI going towards principal repayment and % going towards interest payment? Let’s make use of that concept to understand another thing:

During the initial years, a major chunk of EMI goes towards interest payment. Therefore, if you have a big loan, then the interest paid during initial years will be large. And possibly much larger than Rs 2 lac.

Now if this is your first house purchase and you use it, then the tax benefit for interest payment is capped at Rs 2 lacs per financial year. So even if you are paying much more than Rs 2 lacs interest per year, the excess interest paid (above Rs 2 lac) won’t fetch any additional tax benefits.

So if you are among those who want to close the loan as early as possible but are not doing it thinking that it will reduce your tax benefits, then check again. It’s possible that you are not even getting as much tax benefit as you think you are getting.

But I agree that the tax benefits for a let-out property are better. So loan prepayment strategy should look at all aspects.

Let’s see at some more points that should be kept in mind while managing your home loan. And I will try to make this simple:

  • Your loan tenor may be long, like 25-30 years. But I feel that you should aim to close it earlier. You may feel its better to let it carry for mathematical reasons, but I have this view that you should prepare yourself for early closure if your finances allow. Will discuss this shortly.
  • Remember, that loan repayment is not the only thing in your life. You have other important financial goals that need separate savings. Like children’s education, your retirement, etc. You really cannot just focus on one thing as the delay in saving can set you back by a lot.
  • So after accounting for your regular expenses, base home loan EMI and regular investing for other financial goals, if you have a surplus left, then you can consider prepayment of your home loan.
  • Broadly, you have two options.
  • First, prepay some amount every year. This can be done either by paying extra money with every month’s regular EMI or you can save up some money for few months (or use annual bonus) and prepay a chunk in one go every year.
  • The second option is for more aggressive people. You start investing the surplus money every month in an instrument which you may refer as Loan-Clearance Fund or whatever you wish. This can have equity funds too. So you keep adding money to it every month and allow the corpus to grow for some years. Once the corpus size grows to match the outstanding loan amount, you can use it in one shot to close the loan. If assumed maths of equity giving 12% returns and home loan costing 7% (after taxes) works out, you will mathematically close the loan very early and save a lot of money in interest too.
  • Basically what is happening in the second option is that you are parking the surplus every month meant for prepaying the home loan. But you are postponing the prepayment to a later date. With time, this will become a buffer for you too. If in some month’s you have sudden unplanned expenses that force you into a corner, you can use this fund to pay your EMIs. If RBI decides to increase interest rates and make them too high, then you can again use money from this fund to prepay and reduce the outstanding loan amount. Works well in most cases.

The home loan alongwith other circumstances of the borrower offers tons of permutations and combinations that can be analyzed. As a borrower, you should consider everything that is possible and then chose what’s most practical for you in your unique situation.

You may do any of the following and you will still be right:

  • Continue paying original EMI for full loan tenor.
  • Increase your EMI every year or two to reduce the interest outgo and the tenor.
  • Continue regular EMIs and use your annual bonus (partially or fully) to prepay once a year.
  • Continue regular EMIs and save surplus in equity-oriented funds for several years and hope for good returns and then close the loan in one shot when the value of your investment exceeds outstanding loan amount and become loan-free.

There is no right or wrong or ideal answer here. Every situation demands further analysis and then taking a call.

Always remember that your primary responsibility is to ensure that you pay all your loan EMIs on time. This, in turn, improves your credit score. In fact, lenders always look at your credit score even before approving the loan applications. It will do you good to check out free cibil score for yourself before you apply for home loans. You will know in advance what the banks might tell you. And if the score is good, then you can even negotiate harder with the banks to give you lower interest rates. There are options to take a personal loan for low cibil scores but that won’t help in case of home loans. So its better to find out your credit score and then decide to go or not go for the home loan. You can always first improve your score and then apply for a loan.

Once your loan payment is on track, you should focus on goal-based investing and start investing for your critical financial goals. After all, money is not just there for accumulation. It should be used to achieve your real life goals. Isn’t it?

Home Loans – How Shorter Tenor can save you Lacs?

Home Loans have been a game changer for home buyers.

Had it not been for the easy availability of these loans, it would not have been possible for most people to purchase a home in first place. It’s another matter that easy availability of loans is one of the reasons why property prices have become unreasonably high.

But let’s focus on the issue at hand.

Home loan tenors.

Can a shorter home loan tenor save you money? On what factors should you base your decision to chose the home loan tenor?

For the sake of discussion, let’s take a small example: Suppose you wish to take a home loan of Rs 50 lac. The loan is available at 9.5%. Now theoretically, you have the option to chose a tenor between 10 and 30 years.

Let’s see what happens to the EMI and the total interest paid over various tenors:

I am sure there are few things that have already caught your eye. 🙂

As you can see, shorter the tenor, higher is the EMI. That’s easy. Obviously, the loan gets repaid faster too.

But more important is that shorter the tenor, lesser is the absolute interest cost. And by substantial numbers!

Just compare the rows of 20- and 30-year tenors.

For just a few thousand more (in EMI), you end up saving about Rs 35-40 lac in total interest payment and 10 years in tenor.

Not bad. Right?

And have a look at the last column. It reinforces the idea of having a loan with the shorter tenor.

Let’s take another scenario: You plan to take a property loan of Rs 30 lac. The loan is available at 9.0%. Once again, you have the option to chose a tenor between 10 and 30 years.

Here is the table with answers:

Similar story.

If you are planning for a 30-year loan with EMI of about 24K, just remember that by paying just a few thousand more (around 30K), you will half your tenor to 15 years and also save tons of money on interest (down from Rs 57 lacs to Rs 25 lacs).

This is no magic. And banks are not fooling you.

This is plain maths at play. Don’t be under the impression that a shorter loan is cheaper than a longer one. Both cost the same (9-10% or whatever is your home loan rate). It is just that you are paying the x% interest for a longer duration in the longer-tenor loan.

So the gist of this analysis is that as the loan tenor increases, you need to pay a lot more towards interest cost.

Lenders (banks and NBFCs) won’t tell you this angle because of various reasons – mainly being that they earn more from borrowers if the tenor is longer. 🙂

But to be fair, there are other factors at play too when it comes to deciding home loan tenor.

The biggest factor is EMI Affordability. That too at two levels:

  • EMI Affordability: As seen by the borrower
  • EMI Affordability: As seen by the lender

Let’s deliberate on each of these in a bit detail.

EMI Affordability: As seen by the lender

Lenders are in the business of lending. More often than not, they know whom to lend, how much to lend, etc. (ignore big corporate NPAs for this discussion please).

In order to safeguard their interests when lending money to home loan borrowers, the lenders adhere to certain guidelines. And according to these guidelines, the lenders ensure that sum of EMIs of all the loans (home, auto, personal, etc.) does not exceed more than 40-45% of the borrower’s monthly income. So if your monthly income is Rs 1 lac, you will only get loans until the time your total EMIs are around Rs 40,000.

So that is one limit that is put by the lender on home loan borrowers too. If your income is Rs 80,000, then at most you can expect a loan that has an EMI of Rs 32,000. That too if you don’t have any other loans and have a good credit score.

Now different loan-tenor combinations are possible with an EMI of Rs 32,000:

  • Rs 25 lac loan for 10 year tenure = EMI of 31,669
  • Rs 30 lac loan for 14 year tenure = EMI of 31,468
  • Rs 35 lac loan for 19 year tenure = EMI of 32,091
  • Rs 40 lac loan for 30 year tenure = EMI of 32,185

So for the same EMI eligibility (as per lender’s 40% rule), you can have various loan amounts and tenors.

It depends on how much money you need. So if you need Rs 40 lac as loan and earn Rs 80K a month, then you will have to take a loan of 30-year tenor so that EMI remains within the scope of 40%-lender’s limit.

That’s even if you know that going for a long-term loan means losing out on lacs of rupees on interest paid. This is another reason why you shouldn’t over borrow. Only borrow what is necessary.

Lenders might not even give you the option to chose. But you can always prepay and get over with the loan when you want. Isn’t it?

EMI Affordability: As seen by the borrower

You are earning Rs 80,000 a month and lenders are willing to give you a loan of Rs 35 lac with 20-year tenor. As the EMI would be about ~ Rs 31,500 and within the limit of 40%. But you know (and lenders don’t) that in a few years time, you have to contribute towards your sister’s wedding. So you cannot just be paying loan EMIs. You need to save for her wedding too.

So even though the bank is ready to give you a loan with EMI of Rs 31,500, the fact of the matter is that it’s not affordable for you due to other personal requirements.

Now you have two options:

  • Reduce your loan requirement (not easy)
  • Increase your tenor (possible if lender agrees)

This is what EMI affordability from borrower’s perspective means.

But on the other hand, if you recently got married with your+spouse’s income almost doubling, then you can easily pay more every month to close the loan as quickly as possible. You don’t need to keep paying ‘only’ the bank specified EMI just because you have been told to do so. You should pay more if it’s comfortably possible for you!

Three more points before I end.

  • In an effort to close the loan as early as possible, do not neglect saving for other financial goals. You need to have balance between paying EMIs, saving for short term goals and investing for long term goals.
  • I have not discussed the tax angle here. A lot of people want to continue the loans because of the tax benefits. I feel it’s a bit overrated given the fact that you can save a lot more by closing the loan early. I will discuss this angle in detail in another post.
  • If you are confused and have doubt about your future repayment ability (even after considering your salary hikes), it’s better to go for longer tenor. It will give you flexibility and peace of mind. You can always prepay (when you want) even when you have a long tenor.

That’s it.

I hope I was able to highlight the importance of having a shorter home loan tenor. The choice of home loan tenor does have a big impact on total interest paid to the banks/lenders.

So when you are planning to take a home loan, first of all make sure that the EMI is affordable, not just today but also tomorrow. Also remember that you need to save & invest for other financial goals. You cannot postpone everything till you clear your home loan. It might not work. And most importantly, try to reduce your loan tenor to the minimum you can comfortably manage. It means paying higher EMIs but that is fine. It will help you save a lot of money on the interest costs.

Loans & Why we Borrow?

Loans & Why we Borrow

Loan – one word that has helped millions prepone their dreams.

Be it owning a house, buying a car, getting higher education or even gifting a diamond ring to your wife! Loans have been helpful no doubt.

Unsurprisingly, this help comes at a cost – interest.

But that is how this financial product is designed to be and there is nothing wrong about it. You want to buy something you can’t afford to pay for today? Sure… you can have it. Just pay some extra interest. Fair and square.

But if people can’t afford something today, why can’t they just wait to have more money? In a twist to original words by Thomas Jefferson,

“Why do these people want to spend the money before even they have it?”

So the question is…

 

Why do People Borrow Money?

Its easy for me to say that you should never borrow.

But for most people, that’s not possible. Nobody borrows out of their desire to help banks / lenders earn interest. 🙂 Isn’t it?

In most cases, people borrow when they need to.

Primarily, its to…

  1. Buy some asset (house – if you consider it one; land, even car, etc.)
  2. Increase one’s earning potential (higher education)
  3. Pay for emergencies (like death or medical ones)
  4. Live beyond their means (…you know what I mean)

Lets take up all four of these points in reverse order:

 

Number#4

This should be avoided at all costs.

Its true that you get one life and you need to live it up ‘today’. But don’t use this logic to screw yourself financially.

If you can’t afford to buy a Rs 75,000 mobile phone from your own pocket, then taking a loan to buy it won’t help you. Such showoff (when you can’t even afford it) will only push you deeper into financial misery.

There can be many other examples. Think about it (hint: credit cards).

And this quote by James Basford truly summarizes everything:

The man who never has money enough to pay his debts has too much of something else.

And avoid living beyond your means as much as possible.

 

Number#3

This one is about being in a situation where you don’t have enough money to pay for the unexpected and unplanned events (like repairs, medical emergencies or even death). Some of these risks can be covered by proper insurance (like life, health, critical illness, accident, vehicles, etc.).

But if those insurance covers aren’t in place, you will be forced to borrow.

You can’t avoid it. Though you could have if you had bought insurance earlier. I seriously recommend you read why buying a health insurance can protect your wealth.

Many emergencies cannot be insured. If you need to borrow for such ones, you once again can’t do anything about it. One example is when you can’t say no to your close relatives.

 

Number#2

This one is about funding higher education costs.

The rising fees have led to the growing need for loans for higher education.

Infact, education loans are slowly turning into the new ‘housing loans’. Most middle class children can’t get a decent higher education without loans. Sad but true…

From parent’s perspective, views might differ from one person to other. Some people want to fully fund their children’s higher education, even if it means sacrificing their future financial security. Others want their children to share the burden. And many have a view similar to those in developed nations, where there are no societal expectations that parents will support children financially.

An education loan can help bridge the gap between required amount and money contributed by parents (or self if earned earlier).

It won’t be wrong to consider education loans as sort of good loans. In a way, its an investment you make to potentially increase your future earning power – which is a fair deal I would say.

But people need to be careful about taking education loans. Taking a loan to study in good colleges is fine. But given the kind of shitty colleges there are these days, there are high chances that the degree you get might not be much useful. Getting a loan-funded degree from such colleges may put you in a terrible situation – a big loan to repay and a worthless degree that can’t even get you a decent job.

Even countries like the U.S. are facing a big student loans crisis. In fact, if statistics are to be believed then the Americans owe over $1.2 trillion in student loan debt. To understand the enormity of that figure, compare it with India’s GDP that stands a little over $2 trillion. Unable to repay their education loans, a lot of Americans are resorting to student loan refinancing at lower rates. I don’t know whether India’s education loan portfolio will achieve such gargantuan proportions in near future or not, but authorities must ensure that we don’t walk the path of US student loan crisis.

 

Number#1

Finally, this one is about taking loans to buy assets. Can be for both appreciating as well as depreciating assets.

Buying a house on loan is more of a necessity. Most people don’t have spare Rs 30-50 lacs to just go out one evening and buy a house. Even managing a downpayment of 20% is a tough task for most people.

Buying a house for personal use is fine. I know many people will share mathematical logics about staying on rent and stuff. But if you want peace of mind, having one ‘self-owned’ primary residence is the way to go. If not today, then maybe later. But it helps.

As for investing in real estate is concerned, it turns out that its not a very great investment as many people believe it to be – there is a popular post on Stable Investor about this topic. Please refer to it here.

Buying property on loan is fine. But what about taking loans for depreciating assets like car? You might take it. For many people, buying a car is a need that can’t be postponed. So go ahead and take a loan for it. But try to keep the loan amount to minimum. Also try to pay it off quickly. No point paying more interest on something that is losing value every single day.

 

Managing Loans Smartly

Taking loans is one thing and managing them smartly is another.

Some people are really smart about how they manage their debts. Their proper loan management helps them add real value to their financial portfolio.

For example (and I am using approximate numbers here), if you take a home loan of Rs 50 lac @ 9% for 20 years, your total interest outgo will be about Rs 58 lac. So in total, you pay Rs 1.08 Cr (= Rs 50 lac + Rs 58 lac). EMI is about Rs 44-45K.

But if you are ready to shell out slightly higher EMI of Rs 50-52K, then you loan tenure can come down to 15 years and total interest to about Rs 41 lac. So in total, you pay Rs 91 lac (Rs 50 lac + Rs 41 lac). That’s a saving of about Rs 15-17 lacs on total interest paid. In terms of loan principle, it translates into 30-35%.

These are broad numbers. But clearly show how just a few thousand more every month can be a smart money move when dealing with loans of long tenure.

Those who are not familiar with how loans really work, sadly end up messing their personal financial situations. I will write about this topic in detail some other time.

Now if you have multiple loans, then you need to understand the real nature of each one of them, prioritize them and allocate resources to repay them from your income accordingly. Here, I am not saying that you shouldn’t pay the legally required EMI for each of the loans.

But if you have additional funds that can be used to clear off some of loans, find the most suitable ones (generally high interest loans) to clear off first. Talking of surplus, if you are thinking of investing elsewhere before repaying the loan, please read this – Payoff Loans or Start Investing.

To conclude, I think no one would take loans if they had all the money they genuinely needed.

But since most people don’t have that kind of money, people will continue to borrow. Its just suffice to say that you need to be sensible about your borrowings. More so in case of large loans. I leave you with a hilarious quote by Earl Wilson:

Today, there are three kinds of people: the have’s, the have-not’s, and the have-not-paid-for-what-they-have’s.