Are you planning to make a big-ticket purchase, want to renovate your home, or have a financial emergency to deal with? If so, and if you own a property, you may consider applying for a loan against property.
A loan against property is an excellent option, as you can use the money you borrow for any purpose. But such a loan has its unique terms and conditions. Accordingly, here are five factors to consider before applying for a loan against property.
What Is Loan Against Property?
A loan against property is a secured loan. In this loan, the financial institution (lender) keeps the borrower’s legally owned property as security or collateral. The property could be a self-owned piece of land, a self-owned home, or a commercial premise.
In a loan against property, the borrower remains the mortgaged property’s owner. The property remains collateral with the lender until the borrower repays the amount. It is better than unsecured loans, as the borrower can use it for any purpose.
5 Factors To Consider Before Applying for Loan Against Property
A loan against property can help you borrow a higher amount based on your repayment eligibility. But you should know a few factors before you apply for a loan against property (LAP). Let’s look at five of the most important ones.
1. The Interest Rate
A loan against property is a secured loan wherein the lender keeps your (the borrower’s) property as a security against the money lent. Hence, the interest rate is usually low. But you must note that the interest rate may vary with the financial institution and your ability to repay it. Besides, based on the lender’s offerings, you can choose between a fixed and a floating interest rate on the mortgage loan.
2. The Loan Amount You Get
A loan against property has various types of loans under its umbrella. They include home mortgage loans, loans against the land, loans against plots and mortgage loans against agricultural land. Usually, lenders offer a percentage of the property’s market value as the loan. But the amount they offer can vary based on your repaying capacity.
3. Loan Repayment Tenure
Another significant factor to consider before applying for a loan against property is repayment tenure. Typically, the loan repayment tenure is up to 18 years. But that’s the maximum, and lenders decide the loan tenure based on your capacity to repay the loan. A longer tenure reduces the monthly EMI, while a shorter one increases it. But with a longer term, you pay a higher amount of interest.
Accordingly, you must assess the tenure for which the lender is offering the loan to you and calculate the EMI and the interest you will end up paying at the end of the term. You may shorten the tenure if you are confident of paying a higher EMI. It can reduce the interest you pay and free your property relatively quickly.
4. Charges Involved
Borrowing a loan against property involves various charges like processing fees and various administrative costs. While knowing them, you must also see the prepayment and foreclosure fees, which are around 2-4 per cent on fixed-rate loans.
Additionally, a loan against payment with flexible features allows you to borrow from your sanctioned amount as and when you need and pay interest only on the amount you use. Furthermore, it simplifies borrowing by enabling you to pay interest-only EMIs for up to the first four years of the loan term.
5. Tax Benefits
Mortgage loans provide tax benefits if you show that you are using the money for your housing needs. As Per Section 24B, you might get interest exemptions of up to Rs. 2 lakhs on house mortgage loans. It means if you use the money to buy land and build a home, you can avail of interest deductions.
Looking for Loan Against Property? Electronica Finance Ltd Is Here To Help!
With a straightforward loan against property process and various conducive features, Electronica Finance Ltd can prove the right financing partner. Our process involves:
- Submitting an application and the required documents
- Scrutiny from our processing team
- Approving the application
- Disbursing the loan
We approve loans in as few as 24 hours from the time of document and application submission, based on the validity and accuracy of documents and other factors like the borrower’s eligibility. So, call us at 020-67290700 and speak to our executives to explore the possibilities of a loan against property in your case.
