If you take a Loan against property then it’s a mortgage loan. It is availed by mortgaging property (commercial or residential). There are many banks and NBFCs offering loan against property in India. Both salaried and self-employed individuals between the age 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 in understanding the same:
Loan against property is a secured 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 their dues. Hence, the bank faces lesser risk in advancing loan against property and therefore, approves the application quickly.
Lower Interest Rate
Loan against property being a secured loan carries a lower interest rate in comparison to other unsecured loans. The interest rate on loan 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 Variety of Purpose
Loan against property can be utilized for both personal and business purpose. 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 loan against the property to meet huge funds requirement 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 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, should be in your name. While determining your loan amount eligibility, bank’s get your property evaluated from evaluator and applies an LTV to the fair market price of the property. Generally, you get an LTV of 65% -75%.
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 loan on 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 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 rate, processing fee, and other loan offers. this will help you in getting the best loan deal as per your requirement.