Loan against Property Loan
against property can be availed against a self-occupied residence or a
commercial house. The foremost prerequisite on the bank's part is that there
should not be any other encumbrance. Loan against Property is the most secure
of loans therefore the lending rate is normally low compared to other unsecured
loans. However, because of the configuration of lending by banks, they have a
propensity to be somewhat higher than housing loans. The eligibility criteria
for getting Loan against Property is also laissez-faire, as the property is
available as collateral. The repayment term can also be long from 5 to 15
years.
When to look
at Loan against Property?
For anyone who
has a house or commercial property and is looking for a loan, Loan against
Property should be the first option. The only loan with better features could
be the gold loan. But there could be a lot of sentiments attached to pledging
gold, so it generally gets done as the last alternative. That leaves the Loan against
Property as the better choice. Though a housing loan and the Loan against
Property are secured against the property, Loan against Property is on the
existing assets and the assessment of the property is released for productive
activity. For a businessman looking to inflate business, Loan against Property
comes in versatile as they do not have to gaze for expensive sources and the
processing is also much quicker. A few banks also give overdraft facility
against the property; this will help the business as interest will need to be
paid only for the amount used. Funding children's education can also be done
using Loan against Property; also their marriages. But as a general rule, one
has to be a cautious when taking loans for expenses.
Advantages of Loan against Property
Value of the asset owned is free for
productive use.
The interest
rate is lower than other options like a personal loan or a credit
card borrowing where the funds can be used for a wide variety of purpose
without informing the lender.
Processing is
quicker than a housing loan as the assets is already in our ownership.
Partial
pre-closure is authorized without any penalties. This is an advantage as the
overall interest burden or the tenure of the loan can be abridged by paying
small additional amount.
If the
assessment of the property has risen over a period of time, a re-financing
option can be used to augment the loan amount. This aspect again is very
constructive for businessmen, who are on an expansion spree. They can use the
same property to constantly build the business.
The property
continues to be in the possession of the borrower.
Some
disadvantages of Loan against Property
Banks usually do
not give loans beyond 60 per cent of the assessment of a house property and 50
percent of a commercial property.
New businesses
generally cannot have access to Loan against Property.
They should have been in continuation for at least 3 years. Salaried persons
can get it if they are in employment for over 1 year itself.
There will be
some processing charges usually in the range of 0.5 percent to 1 percent.
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