As a borrower, you can feel spoilt for choice when it comes to loans. The numerous loan options offered by Indian lenders can make you no less confused. While some loans are linked to a purpose, other loans, such as loans against property, are more dynamic. This article enumerates the top benefits of loan against property.
You can use the loan against property amount for any reason, including house construction or purchase, home renovation or improvement, business purposes, travel, wedding, higher education, motor vehicle purchase, or paying medical bills. Since a loan against property is very dynamic and not linked to the end-use, most borrowers prefer applying for a loan against property for all their big and small needs. Read on to find out.
The Top Benefits of Loan Against Property
1. Interest Rates
It will not be an exaggeration to state that loan against property interest rates is among the lowest in India.
The rates typically depend on the borrower’s financial profile, including their credit score, disposable monthly income, the stability of employment or business, age, and the property location. Loan against property interest rates generally starts from 9.50% for those with a solid financial profile.
“India does have some of the highest borrowing rates in the world, particularly compared to Western countries (where we operate) which have witnessed unprecedentedly low interest interest rates which have filtered through to what the banks lend. For this reason, it’s important not to overleverage yourself as any increase could have a significant effect on how you manage your money,” comments Sri Lankan based in the UK, Ruban Selvanayagam of Property Solvers.
2. Approval Process
The approval process of a loan against a property is as easy as applying for a home loan. You can visit the lender’s branch to collect it offline or download it online.
Once you fill the application form and submit it along with the documents, the lender inspects your property and approves the loan. You may conveniently expect the funds within twenty-four hours of the loan approval.
As already mentioned, borrowers apply for a loan against property for various purposes. Unlike other loans, you can withdraw the loan amount for one reason but spend it on other activities.
However, you must spend it on anything but speculative activities like stock trading. Moreover, if you want to avail of tax benefits, you may have to prove where you spent the money.
4. Repayment Term
Generally, when you apply for a loan against property, the lender asks you to choose a repayment term between five years and twenty years.
You can analyses your repayment capability and choose the proper term. If you want a low EMI, choose a short tenure. In contrast, if you want to become debt-free earlier, choose a longer term.
5. Property Types
You can pledge any freehold commercial or residential property to apply for a loan against property. Some lenders also accept a plot of land to approve the loan.
Moreover, any self-occupied, rented, or vacant property can be mortgaged. Hence, almost any Indian citizen with a freehold property can apply for a loan.
6. Interest Type
A loan against property is a dynamic loan with fixed and floating interest rates. If you choose the fixed rate, you can stay immune to interest rate fluctuations. The floating rate depends on RBI policies.
If you choose the floating rate, the loan against property interest rates may increase or decrease after every three months.
7. Property Use
Applying for a loan against property is the best way to unlock your property’s worth. When you mortgage the property, the mortgage lender collects your property documents as collateral. However, you can continue living on the property.
Hence, a loan against property provides you with the opportunity to encase the property’s true value.
Besides the benefits mentioned so far, a loan against property can also fetch you a high loan amount, flexible repayment terms, and various value-added features. Choosing the right lender with a solid financial record also plays a crucial role.
Hence, before applying for a loan against property, you need to evaluate the lender’s reputation and loan terms to get the best deal.