Loan against property is the loan that you can avail by keeping your property as mortgage with the lending institution. In case of loan against property, the loan amount approved by the financial institution is usually 50-60% of the market value of the property being mortgaged. The lender takes into consideration many factors such as the income, age and credit score of the borrower, value of the property, spouse’s income, etc. to decide the loan amount.
Loan against property is a secured loan, wherein your property acts as a collateral. Therefore, in case you fail to repay the loan, the financial institution reserves all the right to seize your property and recover the money.
The loan amount availed through loan against property can be utilized for several purposes.
Some of the common loan against property uses are mentioned below:
Business expansion- If you are an entrepreneur looking forward to expanding your business, you can consider availing is a loan against property to fund the same.
Funding child’s higher education – Quality education can help your children achieve their dreams. Moreover, it can also create various job opportunities for them in the future. Thus, you can also avail a loan against property to fund your child’s higher education.
In case of a medical emergency – You would require access to instant funds in case of a medical emergency. This is where a loan against property can prove to be extremely helpful.
Managing wedding expenses- If you wish to have an excotic wedding, you would need sufficient amount of money.The amount availed through loan against property can also be helpful in managing wedding expeses.
Funding the dream vacation- A trip to an international destination would require a large amount of money. You can fund your dream vacation by availing a loan against property.
With the help of leading financial institutions, availing a loan against property has become a hassle-free process. There are various benefits of loan against property.
Some of the common loan against property benefits are mentioned below:
Lower interest rate
Since loan against property is a secured loan, the rate of interest is generally lower as compared to personal loans.
Lower prepayment charges
You get the option to close your loan against property by making prepayments towards your loan. Financial institutions generally don’t charge prepayment charges in case of loan against property.
As loan against property are pledged against collateral, financial institutions are less hesitant in providing these loans. Therefore, you won’t find it very difficult to avail a loan against property.
Loan against property are provided for a longer tenure as compared to personal loans. These loans are generally available for a tenure up to 15 years, whereas the tenure in case of personal loan is generally up to 7 years.
- As a result of the long tenure associated with loan against property, the monthly installments are comparatively lower. Therefore, it is one of the most suitable options for those who cannot afford to pay higher EMIs.
- It is always recommended that the borrowers should opt for a loan with shorter tenure and higher EMIs as this can reduce the amount paid towards interest significantly.
When applying for a loan against property, you can use an online loan eligibility calculator to check your loan eligibility. You should refrain from using loan against property as a form of risk capital. It should only be availed when you are certain that you would be able to repay the loan within the stipulated period. Now that you are well aware of various loan against property essentials, ensure to make the most of it by utilizing the loan amount efficiently.
It is advisable to compare various loan offers provided by different financial institutions before making the final decision. This will help you avail a loan that best suits your needs. Lastly, make sure to read the terms and conditions of the loan agreement carefully before signing it.