Things to Watch Out for When Taking a Loan Against Property￼
Property loans have been seen as a popular financial tool over the years. Whether you need money to sponsor a lavish wedding or fund your child’s education abroad, or perhaps to finance huge medical bills, a loan against property can see you through. It is an agreement between the borrower and the lender whereby the former borrows money from the latter in exchange for a property as collateral. The pledged property can be residential or commercial. A loan against property is, thus, secured in nature.
However, with a plethora of options available in the market, choosing one that offers the best rates and benefits may seem difficult. Therefore, if you are planning to apply for loan against property, be sure to look out for the things mentioned in this article.
Things to Look Out for When Applying for a Loan Against Property
Property loans are considered ideal for property owners as these are relatively more economical as compared to personal loans, and offer larger amounts to cater to various financial needs. Nevertheless, before you apply for a loan against property, do consider these things:
With a property loan, the loan amount offered against the mortgaged property is determined based directly on the property’s evaluation. It is, therefore, essential that you be well-versed with the value of your asset, which again depends on factors, such as its age, location, size, and amenities.
For example, a newly-built property with modern amenities located in a posh locality will hold more value than an old dingy property in a congested area. Remember that the loan amount offered by lenders will be typically 70-80% of the property’s current market value.
One of the most important features to look out for is the rate of interest offered on a loan against property. Aim for a low rate of interest to ensure cheaper loans. While most lenders offer affordable rates starting from 8.25%, the final interest rate depends on the type of interest you choose viz. fixed or floating. Therefore, it is always a good idea to compare different interest rates offered by various lenders before settling for the same.
Besides the rate of interest, you must also look for a tenor that allows you flexibility so that you are able to make your payments comfortably. A longer tenor extending up to 18 years not only gives you ample time to repay the loan but also automatically reduces your monthly EMIs, making sure you never default on payments. On the other hand, a shorter repayment tenor although demands higher EMIs, makes sure that the entire loan amount is paid off faster. Therefore, choose your repayment tenor wisely. Once you have chosen your desired tenor, you can also get an estimate of the monthly dues by using a loan against property EMI calculator.
One of the best features to watch out for is loan against property tax benefits. While Section 24 of the Income Tax Act allows you tax benefits on the paid loan interest, Section 37 of the same Act offers you tax benefits on the loan interest provided the amount is used for purchasing a house. Go through all the terms and conditions thoroughly to make sure you have understood how it works.
When taking a property loan, check if your lender provides benefits like Balance transfer that allows you to foreclose or part-prepay the loan without having to pay any penalty charges or additional fees. This also lets you enjoy cheaper interest rates.
Knowing your loan against property eligibility criteria beforehand helps smoothen the whole application procedure and improves your chances of getting faster approvals. To find out if you qualify for a property loan, check with your lender. Most lenders require you to meet a few basic criteria, such as, age between 23 years and 62 years, Indian citizenship, and minimum 3 years of experience as a working professional. Besides, your CIBIL score of loan against property also may be taken into consideration when determining eligibility.
As an owner of property, availing of a loan against commercial or residential property is a smart option to get financial assistance when needed. Not only does such a loan help you with a lump sum as high as Rs.5 Crore, but also lets you occupy the property in question throughout the duration of the tenor. You need not worry about abandoning the property as long as you are making your payments on time.
All you need is a reliable lender offering all the above features and benefits. Be prudent when looking up your options. Settle for one that gives you a high amount at the most competitive rates over a flexible tenor based on your eligibility. Once you have chosen the lender, apply for loan against property online for minimal documentation and a seamless experience.