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12 March 2020

Everything to know About a Loan Against Property

The number of loan against property accounts in India stood at nearly 1.6 million back in September 2018, which was a 33% increase compared to the previous fiscal.

To meet financial obligations, more individuals are looking for convenient and potential sources of finance, and loans against property are one of them.

One of the prime reasons behind its increasing demand is that these loans have no end-use restriction. With a competitive loan against the property interest rate charged by lenders, you can use it to fund your higher education or even plan a grand wedding conveniently.

All you are required to do is mortgage an asset or a property with the lender, till you repay the loan. The mortgage can be either land or a house or any other commercial property.

Who can apply for a loan against property?

Those seeking to avail of the benefits of a loan against property should be aware of the eligibility criteria of the same, which is listed below.

For salaried applicants, the individual should be-
  • Between 33 and 58 years old.
  • Working in a reputed organization, MNC or the public sector.
For self-employed individuals, the applicant should be-
  • Between 25 and 70 years old.
  • Have a stable and regular source of income.
While you check for the eligibility criteria, you may also learn for the property loan interest rate before finalizing the deal with a specific lender. This will help you gain a holistic view of the loan you are about to avail.

Things to look for before availing a loan against property

The following is a list of factors to consider while taking a loan against property-
  • Loan amount
A loan against property allows you to avail up to Rs.3.5 crore as you pledge collateral with the lender. The mortgage acts as security assuring the lender of a low risk of default during repayment.
  • Repayment tenor
Leading financial institutions allow you to choose tenors of up to 20 years. Longer tenors will bring down the EMIs. On the other hand, shorter tenors will increase the EMIs but decrease the cost of loans.
  • Rate of interest
The loan against property interest rate is of two types – fixed and floating. Choosing the right type of interest rate is essential since the EMIs and cost of loan will depend on the same.
  • Other facilities of loan against property
Apart from the basic features like loan against property interest rate, amount, and tenor there are certain other facilities that you can avail during repayment of the same.

These are discussed below –
  • Part-prepayment
One of the effective ways to repay your existing loan is part-prepayment of the outstanding amount. It will help you get rid of debts faster and allow you to manage your financial expenses conveniently. Clearing your due on or before time impacts your credit score and increases it.
  • Balance transfer
With this facility, you can transfer the outstanding loan amount to another lender, offering a lower interest rate. Your EMIs will reduce, thereby lowering the overall loan amount too when you avail of this facility.
  • Foreclosure
You can also opt to foreclose your outstanding loan amount before the tenor comes to an end. Foreclosing the loan will help to save on interests.

Though there are charges included in case of a foreclosure, you can do away with this same when you avail of loans from a reputed lender.

Above all, it is evident that the loan against the property interest rate plays a significant role when you apply. Hence, look into the features and benefits of the loan carefully as you plan to borrow the amount to meet your financial obligations.

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