Loan Against Property
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.
What is a Loan Against Property?
As the name suggests, loan against property is a secured loan wherein a loan is provided by the lender against collateral provided by the borrower. Similar to a personal loan, there is no restriction on the end use.
As the loan is secured, the interest rates are relatively on the lower side and the amount provided as loan is high. However, this is dependent on the property that is being put up as collateral along with the borrower’s creditworthiness.
Is it Easy to Avail a Loan Against Property?
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.
Loan Against Property - Benefits
Take a look at some of the benefits of loans against property
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Are you looking for a loan that offers low interest rates? Then a loan against property is a great option.
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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.
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Certain lenders do not add prepayment charges to the loan as well making it all the more economical for you.
Features of Loans Against Property
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
As loans against property are secured, the interest rates imposed are on the lower side as compared to unsecured loans such as personal loans
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.
Loan Against Property - Details at a Glance
Please note that the above values can vary based on the lender, borrower’s profile, value of the property, etc.
Loan Against Property - Eligibility Criteria
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 -
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You should be between 21 to 57 years old
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You will have to be salaried or self-employed. Your type of employment may determine the interest rate imposed and documents required
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Your credit score must be above 750
Please note that the above criteria will vary from one lender to another.
Loan Against Property - Documents Required
While documents needed to avail a loan against property will vary depending on the lender, here are some of the most important ones -
Documents Related to the Property in Question
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Title deed of the property
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Property tax paid receipts
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Documents such as Occupation Certificate, etc. for the property
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Insurance documents for the property
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Any other documents as decided by the lender in relation to the property
Other documents that may be required are
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Salary slips /Proof of Income
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Bank account statements
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Address proof
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Identity Proof of the individual
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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.
