To deal with financial emergencies, funds can be arranged through various ways. These options include taking money out from savings, redeeming investments or availing a loan. While availing loans, choosing the right kind of loan is of utmost importance, which helps in managing financial health.
The limitation with most types of loans means they can only be used for specific types of financial requirements. Instead of choosing a popular loan option, it is always recommended that some research is done so that a better loan can be picked.
Using property as collateral, a secured loan can be availed. With the decision of availing loan against property, you will be making the right loan choice since you benefit from a competitive interest rate alongside a comfortable repayment period.
Who Can Avail Of a Loan Against Property?
If you are seeking a loan, irrespective of whether you are a self-employed or a salaried individual, you can opt for a loan against property. The basic requirement, however, for availing a loan against property is to have undisputed ownership of property. Other eligibility criteria for loan approval may vary from lender to lender.
How to Apply for Loan Against Property?
Applying for a loan against property is a simple process. Most of the lenders now provide the option of applying online. You can go to the website of the lender of your choice and submit the application.
After assessing the submitted documents, lenders determine the eligibility of the applicant and get in touch with the applicant. Alternatively, you can also visit the office of the lender to proceed with your loan against property application.
What Makes Loan Against Property A Good Choice?
Loan against property is a flexible type of loan. Borrowers can use the loan amount for whatever purpose they wish to. Below are some of the advantages of loan against property that make this a better loan option:
- Loan against property interest rate is lower than the interest rate of unsecured loan options. Depending on the loan amount and the loan repayment tenure period, as well as your profile, lenders can offer an attractive interest rate. While most lenders today offer only floating interest rates, you can ensure you increase your chances of availing the lowest possible interest rate by understanding which factors affect the interest rate offered to you. These include your employment, income, credit, and financial parameters, as well as the location and condition of the property being mortgaged.
- Compared with unsecured loans, a loan against property can be repaid over a longer period of time. In other words, the EMI burden remains on a lower side, ensuring low financial strain on a monthly basis. However, choosing a long repayment period can increase the overall interest burden, too. To know the exact EMI amount, use a loan against property EMI calculator.
- Using property as collateral for a loan allows for the sanction of a higher loan amount. A large sum of money plays a critical role in ensuring the fulfilment of major financial needs, such as business expenses.
- The applicant’s credit history also plays a significant role in the approval of a loan against property. This is because although the loan is secured through a property, the borrower’s credit history ensures lenders of their ability to repay the borrower sum, with interest, on time.
- Additional charges on a loan against property are also often on the lower side. Moreover, borrowers with a floating interest rate are not liable to pay any additional charges on prepayment or foreclosure.
With a loan against property, while a property works as a collateral, borrowers continue to receive benefits from the property. They continue to occupy the property or rent it out to earn rental income.
The Downsides of Loan Against Property
While compared with other available loan options, loan against property is often the better choice. However, this does not mean that it comes without disadvantages. The leading drawback of loan against property is the transfer of all the property rights to the lender. This gives the lender the authority to seize and sell the property if the borrower fails to repay the loan. Further, during the loan tenor, the property used as collateral to secure the loan can neither be sold, nor be transferred.
The sanction amount in the case of a loan against property depends on the property market value. This can play to your disadvantage in some cases since property valuation can depend on several factors. Different lenders may apply different criteria to determine the valuation.