Loan Against Property: Best Suited for Business Ventures - Loan Trivia


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Friday 16 September 2022

Loan Against Property: Best Suited for Business Ventures

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Property loans are available for self-employed individuals. By availing of a loan against property, you can secure a sizeable loan amount. The unique feature of a property loan is no end-use restriction. Also, loan against property can be availed of against both residential and commercial properties. These characteristics make loan against property a valuable option for business ventures. Be it for business expansion or meeting other business-related financial needs, a loan against property can serve the purpose. Here are the factors that make loan against property suitable for business ventures:

  • Simpler eligibility criteria: Being a secured loan, property loan eligibility criteria are generally easy to meet. Lenders generally require a satisfactory CIBIL score for property loan. A good CIBIL score is above 750, which can be instrumental in lenders offering a cheaper interest rate. Lenders can also sometimes be flexible with certain eligibility rules. That is because the property pledged acts as a security. If at all loan default happens, property confiscation can be initiated by lenders to recover the loan.  

  • Loan against property interest rates: A key feature of property loan is the cheaper interest rate. For business-related expenses, the requirement may be of a higher loan amount. Lower loan against property interest rates make the loan affordable. Ultimately, this scenario works in favour of businesses. Both managing finances and achieving success become easy.

  • Longer property loan tenor: For a business venture, flexibility in loan repayment tenor can be a great advantage. Because property loan is available for a longer repayment tenor, typically for 18 to 20 years, businesses receive the much-needed breathing time to pay off the loan. This allows for planning the loan repayment prudently. This way, businesses also get the opportunity to keep earning extra profit by investing the loan amount. Once the business starts doing well, loan against property can even be foreclosed by making the prepayment. 

  • Optimum use of the property: Managing resources and putting them to optimum use is vital for businesses. The probability of not only surviving but doing well increases because of this. Through a loan against property, funds become available for use. Because the property-usage rights remain with the borrower, the property can be utilised as per the wish of the borrower, which can help in generating additional income, too. 

  • Sizeable loan amount: For determining the property loan amount, assessment of the market value of the property put as collateral is carried out. If the property is of high value, a loan amount of even three to four crores can be availed of. With this sizeable loan amount, planning and executing business expansion and arranging funds for other expenses become easy.

  • Flexi property loan: Property loans also come with the flexi feature. This saves businesses from worrying about their finances. Flexi loans make the entire loan amount available and give the option of withdrawal on the go as per the requirement. Interest is only levied on the money withdrawn and not on the entire sanctioned amount. Business ventures can remain financially secure because of this provision. Also, for the initial four years, interest-only property loan EMI can be paid in the case of flexi loans, which helps businesses get ample time to grow.

For individuals starting a business, funding crunch can crop up as a massive issue. If you own a property, a loan against property can resolve the funding problem. With everything property loan offers, this is best suited for business ventures. 

Must Read: Loan Against Property: Myths vs Reality

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