In case you need a loan and have collateral to pledge, a great option to consider is a loan against property.
But what are loans against property? What are the features and benefits of these loans?
Let’s find out.
Getting a loan against property is dependent on many factors such as the market value, location, and physical condition of the property, along with the credit profile of the borrower, among others.
It may take quite some time for the verification of all these factors, hence unlike personal loans, the approval for a loan against property is quite long and can take a few days to a few weeks.
Take a look at some of the benefits of loans against property
Are you looking for a loan that offers low interest rates? Then a loan against property is a great option.
Another benefit is that loans that are provided against collateral come with longer repayment terms. If regular personal loans have terms that are upto 5 years, loans against property have tenors of upto 25 years.
Certain lenders do not add prepayment charges to the loan as well making it all the more economical for you.
Here are some of the salient features of a loan against property -
Since a loan against property is only provided against a property as collateral, this loan is considered to be a secured loan
Low Rates of Interest
As loans against property are secured, the interest rates imposed are on the lower side as compared to unsecured loans such as personal loans
Longer Repayment Terms
Loans against property come with repayment terms that can extend upto 25 years or so depending on the lending institution
If you have pledged your asset for a loan against property, then the ownership of the said property will still be in your name even while you are repaying the loan
Depending on the type of interest rate chosen (variable or fixed) you may have the option to pre-close your loan without having to pay a penalty. However, this will completely depend on the lending institution.
As loans against property are secured, they can be availed quite easily without extensive verification processes or multiple documentation requirements
Salaried applicants can enjoy tax benefits for a loan against property under Sec 24(B) if this loan is being used to fund their new house. However, if a loan against property is used for business purposes, the borrowers can claim tax benefits under Sec 37(1) of the Income Tax Act.
7.25% and above p.a.
Upto Rs. 20 - Rs. 25 crore
Upto 15 years
1% to 3% of loan amount + GST
Please note that the above values can vary based on the lender, borrower’s profile, value of the property, etc.
The eligibility conditions imposed vary from one lender to another. However, your age, income, value of the property that is being put up as collateral, and your credit scores will matter the most.
Some of the common eligibility conditions are -
You should be between 21 to 57 years old
You will have to be salaried or self-employed. Your type of employment may determine the interest rate imposed and documents required
Your credit score must be above 750
Please note that the above criteria will vary from one lender to another.
While documents needed to avail a loan against property will vary depending on the lender, here are some of the most important ones -
Title deed of the property
Property tax paid receipts
Documents such as Occupation Certificate, etc. for the property
Insurance documents for the property
Any other documents as decided by the lender in relation to the property
Salary slips /Proof of Income
Bank account statements
Identity Proof of the individual
Form 16/Income Tax Return
Once the documents are satisfactorily verified by the lender, a physical inspection of the property will also be carried out by the lender’s team to verify the physical condition of the property.
After the physical verification, the lender will put a value on the property based on the documents submitted, the physical condition of the property, market value, etc. and your loan amount will be sanctioned based on this.
The rate of interest charged on loan against property depends on multiple factors such as the credit profile of the borrower and the policies of the lender.
The general rate of interest charged by banks and NBFCs is in the range of 7.25% -15%.
The processing fee for a loan against property can range from 1% to 3% of the loan amount plus GST.
However, the interest rate charged on loan against property has a lesser rate of interest than personal loans generally as a loan against property is secured by an asset, therefore the risk is lower for the lender.
Since a loan against property is a high ticket loan and the amount disbursed is on the higher side, the tenure is also quite long. A loan against property maximum tenure is generally around 15 - 25 years.
Certain lenders allow the borrower to prepay the loan without having to pay a penalty. However this can depend on certain factors in addition to the lender’s discretion such as -
The type of interest rate chosen, such as variable or fixed rate of interest
Creditworthiness of the borrower
The amount of loan that is already repaid as well as the repayment term left
One of the premier lenders in the country, Money View offers personal loans that are highly advantageous. Not only are these loans easy to avail, the documentation requirements are minimal, and the loan can be availed within 24 hours of application approval.
While most lenders look for borrowers who have a CIBIL score of over 750, at Money View, you can get instant personal loans even with CIBIL scores as low as 600. This is because we use a unique credit rating model that considers not just your creditworthiness but other factors as well.
Therefore, as long as your CIBIL score is 600 and above or Experian score is 650 and above, you can still get a personal loan from us.
Given below are some of the top lenders in the country offering Loan Against Property (in no particular order)
Name of Bank
8.35% p.a. onwards
Rs. 10 lakh to Rs. 5 crore
Upto 15 years
State Bank of India
8.80% p.a. onwards
Upto Rs. 7.5 crore
Upto 15 years
7.90% p.a. onwards
Rs. 5 lakh to Rs. 5 crore
Upto 20 years
Kotak Mahindra Bank
7.25% p.a. onwards
Rs. 10 lakh to Rs. 5 crore
Upto 15 years
7.35% p.a. onwards
Rs. 10 lakh to Rs. 7 crore
Upto 20 years
Your interest rate plays a crucial factor in deciding your EMI and one of the best ways to manage this is to avail loans with low interest rates. Your interest rates are dependent on the factors given below -
Your credit score is the most important factor that determines your interest rate. Higher the credit score, higher is your creditworthiness.
If your creditworthiness is high, it indicates that you have always repaid your loans on time and in full which means that the lender can trust you. Therefore, not only will your interest rate be on the lower side, you will be eligible for high loan amounts as well. A CIBIL score of over 750 is always ideal.
The Property to be Mortgaged
If your property is new, in an economically feasible area, and has good resale value, then you will be able to get a higher loan amount. Additionally, commercial properties will fetch a different rate as compared to residential properties.
Longer the loan repayment term, lower is the interest rate. However, you will end up paying more as the overall interest amount in this case. Therefore, if you can afford to, opt for a shorter loan term and do your best to repay the loan as early as possible.
Another important factor that determines your loan interest rate is your profile such as your age, income, location, type of employment (salaried/self-employed), etc.
For eg. If you are a salaried professional in a tier-1 city commanding a good monthly income, your interest rates will be lower than that of a working professional who is close to retirement age.
Here are certain points that you would need to consider before availing a loan against property:
The property being offered remains mortgaged with the lender till the loan is repaid in full although you as a borrower will still retain ownership.
While you will be allowed to rent out the property or utilize it yourself, you will not be allowed to make any modifications to the property or sell the property.
If you are unable to repay the loan on time, the property will be taken over by the lender. So, it is good to borrow against your property only if you are sure of repaying the amount on time.
There are also different types of mortgage loans or loans against property. Click here to know more about them.
A loan against property is a great option if you need a large amount of loan and have a property to put up as collateral. Since this loan is secured, the interest rates are relatively low but takes time to be disbursed.
In the meantime, if you are looking for an urgent loan that does not require collateral and is disbursed within 24 hours of application approval, visit the Money View website or download the app to apply for a personal loan now.
Ans: Yes, it is possible. Given below are some of the factors that affect loans against property.
Based on how the above conditions are met, your interest rate will be on the lower or higher side.
Ans: No, there are no restrictions. Similar to a personal loan, a loan against property can be used for a multitude of different reasons such as for education, wedding, travel, etc.
Ans: No, a loan against property by nature is a secured loan. However, if you are looking for an unsecured loan that is quick and easy to avail, Money View personal loans are your best option. Not only can these loans be availed from the comfort of your home, you can get them within 24 hours of application approval. Visit the Money View website or download the app to apply today!