Amongst all the variety of loan offered by banks, loan against property is the most popular and recommendable product. It attracts the borrowers as it allows them to borrow a large amount of money to meet any kind of need. It is a secured loan which will help you to generate immediate funds in exchange for the collateral.
Let’s learn more about this loan against property.
Loan against property gives you perceptible benefits as you can use it to fund any of your personal or commercial financial crises.
- Generate a large sum of money.
- Collateral of your property offers you lower interest rates.
- For funding any of your personal or commercial expenses.
- Longer tenure to repay the borrowed money.
Let’s learn about it from the roots of its features.
Any individual occupied in service or business is eligible for it.
The most attractive part of this loan is any property owner can apply for it. You can either be a salaried or self-employed individual, but you need to ensure that you have a fixed or a regular income. This is a secured loan that helps you to borrow money in exchange for your valuable collateral. It is because regular income will give you the backbone to repay the borrowed money slowly in the long run.
A large amount of money from your collateral
You can get a higher amount of money from your mortgaged property since the amount is calculated on the market price of your own property. Various lenders have different lending policies, but usually, you can avail up to 60% of the market value of your collateral property. Suppose, you have a collateral property of worth Rs.1 crore then you can get a loan of up to Rs.60 lakhs against it. Loan against property is the easiest way to generate money in exchange for an immovable asset.
Lower Rates of Interests
The interest rates are charged so the lenders can also earn some amount of income when they lend you money. There is some risk attached to the interest rates. A borrower with a lower risk profile will get a lower rate of interest, whereas with higher risk profile will fetch a higher rate of interest. When you take the loan against collateral, this risk gets minimized, but in case you fail to repay the borrowed money, then the lender has the authority to auction your property and recover the money. Since the loan generates money from your own mortgaged property, the rate of interest is lower.
Fund for any of your need
Secured and personal loans allow you to utilize your loan money for any of your choice or requirement. But other loans like education loans, home loans, or vehicle loans will enable you to use loan money for only meeting the specific needs. Loan against property doesn’t follow any such specific purposes. In fact, it is the money from your collateral property, which is secured, and you can use it for any purpose.
Longer Tenure for Repayment
The most luring part of this loan is that it provides a long time to repay the borrowed money. Banks generally offer the repayment time frame up to 15 years or 180 months. Since the borrowed money is high, so the time period is also long so that you can pay the monthly repayment amounts.
Quicker processing of Loan
Loan against property has easy and less documentation process. It is because the borrower and the lender won’t have to spend their time in producing and verifying all the documents. It facilitates speedy approvals and flexible repayment options.
Eligibility criteria and other related information
There are other aspects which are essential for a borrower to keep in mind while opting for a loan against property.
Since you are offering your own collateral property for this loan, the lenders follow some eligibility criteria. The value of collateral property gives the amount of borrowed money. So, you have to ensure that the property which you plan for keeping in mortgage should have high market value so that it will fetch you a higher loan amount.
This loan requires less documentation, but those few documents ensure your eligibility for availing this loan. They are your age proof, address proof, income proof, and documents of the self-owned property. If you fail to provide a single document or any error is found in any document, then your loan gets rejected so ensure the accurate availability of the above-mentioned documents.
Apart from the interest rates, the lender also charges you processing fees, valuation fees, repayment and foreclosure charges. You need to ensure to go through these charges before you accept the loan offer from the bank as this will help you to avoid penalties and late repayment fines.
Loan against property has a lot of benefits, but the borrower should be well informed about its roots before applying for it. It is very risky to mortgage your house or property. An individual who is planning to start up a business where there is a substantial amount of risk involved should rethink before opting for this loan. This loan is not to generate money for risk capital. The borrower should be confident that he will be able to repay the loan within its stipulated period.