An individual can meet financial emergencies anytime and need advances to meet those requirements. Based on a borrower’s necessities, financial institutions extend different types of credit facilities, each with certain benefits, and one of them is a loan against property.
It is one of the effective financing options that individuals can resort to for meeting various financial crises. Prospective borrowers can avail substantial loan amounts from reputed financial institutions at reasonable terms and flexible repayment structures.
Having a fair idea about the benefits of this financial product will allow applicants to make the most of their borrowings.
How can a loan against property solve financial problems?
As the name denotes, a property loan is a high-value financial product that can be availed by pledging an asset as a mortgage to the lender. Funds obtained from this credit facility can be utilised to meet various business and personal requirements as there is no restriction imposed on the fund usage. Compared to other available financial products in the market, opting for a mortgage loan is a smart choice as it helps maintain financial stability in the long run.
Here are some of the features of this credit facility that makes it an ideal choice for borrowers:
- Obtain large amount
The sanctioned amount in a loan against property depends on the mortgaged property’s fair market value. Lenders can extend up to 90% of credit based on the property’s value. However, factors like property’s age, location, type also play a crucial role in deciding the disbursed amount. Although borrowers pledge their high-value assets as security to the lender, the ownership remains to the former. The amount will vary across lenders and also from salaried to self-employed individuals.
- Affordable interest rates
Since a loan against property is a secured credit facility with an asset backing it, a lender’s risk is reduced as any financial loss can be recovered by seizing the property and selling it to obtain the remaining money. Lenders offer a minimal interest rate due to the underlying collateralisation factor. Affordable interest rates can significantly reduce the overall interest outgo, decreasing borrowing costs.
- Flexible repayments
Based on the lender, credit obtained against pledging a property can be conveniently repaid over a flexible tenor. Some lenders offer repayment tenor of up to 20 years. Choosing an extended tenor allows borrowers to reduce their monthly instalments and manage their budget, but the interest outgo will be higher. While on the other hand, opting for a shorter tenor will increase the EMIs and hamper the borrower’s disposable income.
In this regard, using a loan against property EMI calculator would be the best decision. With the help of this calculator, individuals can determine the exact EMI, interest outgo and overall cost of the loan, which will further help them manage their finances effectively.
- Easy eligibility and documentation
One of the best parts about a LAP is its flexible eligibility and documentation. Again, for being a secured advance, lenders offer flexible eligibility parameters. Some of the basic loan against property eligibility criteria include-
- For salaried applicants, age limit should be 28-58 years, and for self-employed, it should be 25-70 years
- Salaried individuals must be employed in a reputed MNC or private organisation, and self-employed individuals must have a stable business with a steady income
- Both the applicants must have Indian residency
In terms of documents, one needs to submit the following-
- KYC
- Address proof
- Property documents
- Salary slip (salaried)
- Business existence proof (self-employed)
- Bank account statement
- IT returns etc.
- Benefit of balance transfer
If borrowers find that the present repayment structure is getting expensive and unbearable, they can opt for a loan against property balance transfer option. They can transfer the outstanding principal to a lender offering reasonable interest rates and flexible EMI structures. It will allow them to secure better loan terms and customised offers.
For instance, some reputed lenders also extend pre-approved offers on a wide range of financing options, such as a loan against property, home loan etc. These offers reduce the hassle of tedious documentation and save time. Check your pre-approved offer by mentioning your essential credentials.
Furthermore, borrowers can claim tax exemptions depending on the usage of the funds. There are certain sections under the Income Tax Act which dictates these deductions. Borrowers can avail loan against property tax benefits on both principal and interest components up to a certain amount based on the end-use of the credit. Note that one must produce essential documents to substantiate their claim for the tax benefit.
Therefore, these are some of the crucial features that make a loan against property an ideal financing option for borrowers. Having a clear idea about these features will allow borrowers to make the most of the obtained credit and meet their necessary financial liabilities.
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