All The Features and Benefits You Should Know of Loan Against Property

Loans have become an essential part of modern life. It is considered a helpful tool for meeting long-term and short-term monetary needs during your journey. With changing lifestyles and increased demands, it is essential to plan your finances. 

Even though investments produce returns, some life milestones, like a child’s education, marriage, or a carefully planned international vacation, call for extra funding. So, getting a loan against property is useful. It is also named a mortgage loan. It allows people to use their assets as collateral. You can use this loan to cover major expenses or for personal use. This loan is available from banks and other financial institutions. It is secured by real estate on a home, a business, or a plot of land. 

Purpose of Loan Against Property

You can achieve your personal or professional goals easily with a loan against property. It is a secured loan. Getting one is easy as long as you are the legal owner of the property. This loan is available from the majority of top banks. It can be used for any personal needs, which include a wedding, education, medical expenses, or other financial needs.

Mortgage loan interest rates range from 8.00% p.a. to 20% p.a. With mortgage loans, you can get loans with a maximum value of Rs. 25 crores and a maximum term of 20 years.

Features of a Loan Against Property

A loan against property is a basic loan product. It is secured by the mortgaged property. These are some of the primary features of this kind of loan: 

• Banks have different loan amounts. The typical loan amount is up to 60% of the property’s market value. The sum is between Rs. 10 lakhs and Rs. 7.5 crores. 
• The interest rate offered is competitive. It has longer pay-back terms. 
• EMI allows for simple repayments. 
• For this kind of loan, most banks only need a few documents. Processing only takes 3–4 days. 
• The minimum age limit is 21, whereas the maximum age is 65. 
• Self-employed people, salaried professionals, and IT analysts can all apply for this loan.

Benefits of a Loan Against Property in India

Several Uses

You can put the money you get from a loan against property to many different uses. The lender doesn’t care if you use it for personal or business purposes. There are no restrictions. The ways you can use a loan against property may differ from lender to lender, but in general, you can use it for:

• Higher education or education abroad
• Marriage or Wedding
• Healthcare emergencies
• Combining debts with high-interest rates
• Growth of a business that already exists
• Remodelling/building a house
• Improvements to business infrastructure

High Amount of Loan Approval

One of the best things about a loan against property is that you can get a huge loan. In a loan against a property, the loan amount is based on the property’s fair market value. They do this with the help of a number called the loan-to-value ratio. 

Lenders grant you up to 70% to 80% of the property’s fair market value for the loan term. 70% to 80% is up to 15 crores, a large amount compared to other secured and unsecured loans.

Fair Interest Rates

A secured loan gives the lender something to fall back on if the person doesn’t pay or pays late. So, some security is needed to get a loan.

For this reason, lenders offer loans against property with lower interest rates than other mortgages or secured loans.

Different lenders charge different interest rates for loans secured by a property. It is around 8% to 10% per annum and can go up to 20%, depending on the lender. This low-interest rate maximises a loan against property and simplifies EMI payments.

Property Categories Vary for Collateral

You can use many forms of property as collateral for a loan against property. Lenders approve loans against residential and commercial property. Lenders with your best interests often approve industrial security. They will also verify the self-occupied, rented, and unoccupied properties. The property should not have any legal problems. Co-owned properties can also be used as collateral for a loan against property. Yet, standards differ by lender.

Flexible Repayment Tenure

Flexible and easy repayment terms allow you to pay EMIs promptly and without hassle. Secured loans, like a loan against property, can be repaid over 15 years, compared to 5 to 7 years for unsecured loans. The longer time frame doesn’t stress the person, lowering their EMI payments and interest rates. It helps you decide your financial needs and set aside your EMI.

Fast Approval

Loans against property have a faster application and verification process than unsecured loans. Unsecured loans lack collateral. So, lenders can’t rely on them. Lenders thoroughly assess the person’s repayment capacity during the screening and eligibility process. Online loan applications are convenient and time-saving. Same-day loan approval is typical.

Minimal Documentation

Another benefit of a loan against property is that the application for the loan doesn’t need much paperwork. Unlike the documents needed for a home loan, a loan against property only requires minimal paperwork. The person must give the following:

• Address proof 
• Identity proof 
• Bank statement proof (Salary credit statement, operative bank account statement)
• Proof of income or employment (such as a pay stub, letter of employment, tax return, profit-and-loss statement, or balance sheet)
• Property/ title documents

Small Foreclosure Fees

Loan against property has low-to-no foreclosure fees. Most banks or NBFC lenders charge between 2% and 4% of the outstanding principal plus taxes. Some lenders don’t charge this. 

You can close your property-secured loan for a minimal or no fee. Consider the lenders who mention every processing fee in loan documents. 

Conclusion

The loan against property is great for people who have assets that are not being used. 

Being a secured loan, a loan against property is simple to get with only a few needs. It includes the property and KYC documents. When considering a LAP, assess all the pros and cons carefully. If you can’t repay the loan, you risk losing your home. It is crucial to have enough income to repay the loan.

For more details on loans against property, you can visit the website of Piramal Finance and explore their products and services.