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loan against property
Having or owning a property can be of great help, especially when you need funds urgently for business, personal or other uses. You can even leverage the value of the property to get funds for a dream vacation outside the country, pay for a wedding, realize a business expansion plan you have been working on or take care of the medical requirements of a parent.
A loan against property is a loan availed of against a collateral, i.e. a residential or commercial property. Depending on your financial health, needs, and the tenor for the loan, there are many types of loan against property available today. Before we tell you about why you must consider availing of finance from a private lender, let us first understand the types of loans against property available in India.
Types of Loans Against Property
Based on Property Type
Loan Against Residential Property
This is one of the most common types of loans against property in India. Under this type of loan, individuals can avail of funds against their home or any other residential property owned by them which may be self-occupied, rented out, or lying vacant.
Loan Against Commercial Property
Here an individual can mortgage their commercial property like an office space, or an industrial unit to get funds against it at its market value.
Lease Rental Discounting
In this, a leased property is used as collateral for the loan. The rent earned can be used as the EMI.
Based On Applicant’s Employment Type
Loan Against Property for Salaried Individuals
Salaried individuals aged between 25 and 70 years and employed with an MNC, or any public or private sector company are eligible for funds against their property. Different lenders have different age requirements for loans against property. So, it’s best to talk to your lender before beginning the application process.
Loan Against Property for Self-Employed
Self-employed borrowers aged between 25 to 70 years having a stable income source with a business continuity of 5 years or more can also obtain an advance with Loan Against Property.
Based on Usage
A loan against property generally comes with zero end-use restrictions. Thus, it can be used for any purpose as the borrower sees fit. Based on usage, the loan against property types are of the following types.
Loan Against Property for Education
Such a loan can be used to cover higher education expenses, such as tuition fees and the cost of study materials. Borrowers can also use the funds to cover their travel expenses and accommodation costs, etc.
Loan Against Property for a Wedding
From catering to decoration to bridal makeup, a wedding means several expenses,. One can use a loan against property to handle all sorts of wedding expenses with ease.
Loan Against Property for Debt Consolidation
If you have several debts running, combine all your existing debts into one with a loan against property for debt consolidation. It will ultimately reduce the interest outgo and hassle of managing multiple repayments.
Loan Against Property Balance Transfer
This allows borrowers to transfer existing debts to a new lender. By doing this, you can enjoy lower Lap interest rates, top-up loans, quick processing fees, and nil foreclosure and prepayment charges.
Benefits of Loan Against Property from Private Finance
There are many private companies offering loans against property today. The benefits of availing of a loan against property from a private finance company are:
1) No End-use Restriction
Here funds can be utilized for any legitimate purpose, be it for business expansion, home refurbishing or extension, meeting education and medical expenses, or debt management.
2) Longer Tenor
A loan against property from private finance companies can be availed of for a tenor ranging anywhere between 5-15 years, with the loan term not extending beyond your retirement age.
3) Lower Rate of Interest
A loan against property can be secured at a significantly lower rate of interest as they are secure loans with low risk. Private lenders, sometimes, offers these loans at especially lower interest rates to entice new customers.
4) Large Loan Value
Loan against property from private companies allows borrowers to avail of larger amounts of loan. The loan against property calculator can help you calculate the right amount to be borrowed so that EMIs are within your reach.
5) Easy Eligibility and Approval
Since mortgage loans are secure and do not require high eligibility, they are easily approved by banks and financial institutions. Thus, long-term mortgage loans are good and beneficial.
6) Minimum Processing Fees & Other Charges
A loan against property is typically sanctioned at lower processing fees and pre-payment charges than other loan types.
7) Refinancing facility
Private finance companies also offer refinancing facilities or loan against property balance transfer. This allows you to top up your current loan, i.e., increase the amount that you have already borrowed against your property, with minimum formalities at a lower interest rate.
8) Tax benefit
A loan against property tax benefits can be claimed on interest deductions under section 24(B) of the Income Tax Act for salaried employees, provided that the given amount is used for the construction of a new residential house. If used for business, then you can claim benefits under section 37. However, there are no tax benefits for meeting expenses such as marriage, education, health, etc.
Summing Up
So, with loan against property interest rates being lower than other loan types and having multi-purpose usage, this type of loan can come in handy when you have no other option. Using your own property to avail of easy loan can be a solution for borrowers looking for an easy loan. If availing of a loan against property, take a loan from a private lender to get extra perks and benefits.
