Loan Against Property is a secured loan where the borrower keeps his property as a security against the loan. However, the right of ownership of the property remains with the borrower (owner of the property). If in case the borrower fails to pay off the loan then the seller has a right to sell, the lender can sell the property mortgaged by the borrower.
Loan Against Property
- The loan amount and interest varies is differ from bank to bank. However, the minimum of the loan will be INR. 2 lac, and the maximum amount is INE. 100 lac.
- Usually, the rate of interest is above 65%. However, it depends on many other factors and the terms and conditions of the bank.
- The loan amount can not exceed 50% of the value of the property for commercial setup and 60% for residential property.
- The loan tenure cannot exceed 15 years.
- The borrower can choose the fixed and floating rate of loan against property.
- The borrower can pay the loan in EMIs through
- Post-dated cheque
- ECS to debit the bank account
- ECS with the EMI amount.
- After the completion of 180 days of availing the loan, the borrower can repay the entire amount of the loan anytime. However, pre-payment charges will be levied accordingly.
Facts to consider before availing the Loan Against Property
- Do not exceed the loan amount more than you need. The cost must fit into your estimated budget.
- Comparing interest rates and schemes of 3 -4 banks will be more beneficial. Compare and choose the bank which provides you maximum profit and the lower rate of interest.
- However, it is important to determine the tenure of the loan. Loan for a longer tenure might cost you higher interest.
- Gain knowledge about the entire process fee and time.
- However, it is important to go through the terms and conditions thoroughly to avoid trouble in the future.
- If you decide to pre-pay the outstanding amount of your loan altogether, the bank will charge 2% to 3% of your loan.
- To not be a defaulter because
- Defaulter in payments will result in penalties.
- It will affect your credit history adversely.
- It can destroy the image of your profile.
- All deals and offers agreed upon must be supported by the relevant paper. However, the loan document must contain the followings
- The rate of interest on a loan
- Processing fee
- Interest schedule
- Pre-payment charges
- Do not provide any false information to the bank because it might put you in a trouble.
- After receiving the loan pay the principal amount with interest on time.
Advantages of loan against property
Loan against property is the best option to raise the fund for various purposes. Loan against property is a kind of loan which is easy to get and easy to pay. However, it is the loan for a longer tenure. There are various advantages of a loan against property
- Loan Against Property helps in receiving better opportunities for higher education.
- With the help of a loan against property, you can expand your business.
- Loan Against property helps in managing the wedding expenses.
- Also, it helps with purchasing large equipment and machinery.
- However, the borrower can also buy commercial or residential property by taking a loan against property.
- The limit of your overdraft will be determined by the property value and your account history.
Advantages of the secured loan over the unsecured loan
- Bigger tenure
- Lower EMI, and
- The lower rate of interest