If you take a Loan against property then it’s a mortgage loan. It is avail by mortgaging property (commercial or residential). There are many banks and NBFCs offering loans against property in India. Both salaried and self-employed individuals between the ages of 21 to 65 years can apply for a loan against property. There are several advantages of taking a loan against property, the following points will help you understand the same:
Secured Loan
A loan against property is a secure loan, availed by mortgaging property. The chances of its approval are higher in comparison to an unsecured loan, as you are keeping your asset as collateral with the bank. In case you default on your loan repayment, the bank can sell your property to cover your dues. Hence, the bank faces lesser risk in advancing loans against property and therefore, approves the application quickly.
Lower Interest Rate
A loan against the property being a secured loan carries a lower interest rate in comparison to other unsecured loans. The interest rate on loans against property starts at 8.80%. But whether you will be able to get a loan at this interest rate or not will depend upon your eligibility.
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Can be Utilized for a Variety of Purposes
Loans against property can be utilized for both personal and business purposes. Once the loan is disbursed, you are free to use the money borrowed as per your will. There is no strict supervision over the utilization of loan amount taken. Generally, people take loans against the property to meet huge funds requirements like an international vacation, renovation or extension of the house, for higher education abroad, sudden medical expenses, for starting a new business unit, etc.
Loan Tenure
Loan against property offers you a flexible loan tenure of up to 15 years, whereas most of the unsecured loans are short-term loans of up to 5 years only. Longer tenure implies easy and affordable EMIs.
Different Property Types can be kept as Collateral
You can avail a loan against the property by mortgaging both residential and commercial property. The property to be kept as collateral must be owned by you and should be in your name. While determining your loan amount eligibility, banks get your property evaluated by an evaluator and apply an LTV to the fair market price of the property. Generally, you get an LTV of 65% -75%.
Foreclosure
Like any other loan, you can pre-pay your loan against property any time during the loan tenure, if you have surplus funds available. If you have availed the loan at a floating interest rate, then as per RBI guidelines, there are no foreclosure charges if you prepay your entire loan or some amount of it. On the other hand, if you have taken a loan on a fixed interest rate then you may incur some preclosure charges as per your loan terms and conditions.
Keeping in mind the above-mentioned benefits of taking a loan against property, apply for it to meet you’re personal as well as business requirements. You can apply for it offline or online. Applying online is a better option as it saves your precious time. Before sealing the loan deal, do online research regarding interest rates, processing fees, and other loan offers. this will help you get the best loan deal as per your requirements.
