Key Things To Remember Before Opting For a Loan Against Property

Loan against property is one of the most sought after loan schemes in the market as it uses property, both residential and commercial, as security or collateral and promises loans at a lower rate of interest, especially when compared to unsecured loan options. Further, loans against property are disbursed faster and the best part is that the ownership of the property remains with the borrower through the tenor of the loan. 

Any individual who owns a property can apply and avail the benefits of this loan scheme. However, there are a few things property owners must know when applying for loan against property. Read on to know more.  

Types of Loan Against Property

There are a variety of loan schemes available in the market suitable to each and every borrower, depending on the principal amount, desired tenor and the quality and type of property being mortgaged. Various customer-based schemes are also available which provide additional benefits to salaried and self-employed individuals. 

Loans against property are available against both residential and commercial properties. The money availed of comes with zero end-use restrictions. It can be used to fund your child’s education, pay for their wedding or even for business expansion.

Interest Rate and Period of Tenor

Based on tenor and the borrowed amount, the interest rate varies from scheme to scheme.

The interest rate on loan against property can vary depending on several factors including loan value, tenor, credit history of the borrower, their income, etc.

A high credit score helps in decreasing the interest rate. Similarly, the quality of property is also essential in the loan process as someone with a property with high resale value will get better loan terms than someone who has a property with low resale value, located on the outskirts.

 

Opting for a longer tenor, decreases the interest rate and makes the EMI more affordable. However, since these loans are based on compound interest calculation,  opting for a higher tenor will lead to higher interest outgo in the long run. Hence, it is suggested to choose longer tenor for high amount loans and shorter tenor for low amount loans, keeping in mind the affordability.

Eligibility Criteria

Another key feature is the eligibility criteria, which includes having a healthy credit score of at least 725+ and a stable source of long term income or a high profit producing business. 

The lenders prefer younger candidates due to the scope of a longer period of tenor and hence their applications get approved quickly as compared to others.

A list of documents including proof of identity, property papers and proof of income are also essential and meeting the above requirements can help in speedy approval and loan transfer.

EMI Calculator

With multiple financial companies and creditors offering loans in the market it is essential to choose the most suitable loan scheme based on the individual requirements.

Therefore, to make the selection process a bit easier for the borrowers, various banking sites have EMI calculators available on their website which helps determine the best suitable loan scheme on basis of amount, interest, and tenor.

Application Process 

Borrowers must through the terms and conditions of the loan scheme before signing on the dotted line. This means carefully reading details, such as available tenor, repayment options, tax benefits, and additional costs, such as processing, documentation, and pre-payment charges, if any. 

Keeping these points in mind will help you find the best loan against property deal.