A loan against property is a secured loan that lending institutions, such as banks, housing finance companies, and NBFCs, offer against a residential or commercial property. Whether you are a business owner seeking funds for expansion or a salaried employee requiring funds for medical emergencies or home renovation, a loan against property can be a great solution for your financial needs. This type of loan allows you to keep your savings intact and offers low-cost EMIs with repayment periods extending up to 15 to 20 years.
However, before you decide to apply for a loan against property, there are some important facts that you need to keep in mind. In this blog, we will discuss these facts in detail.
When applying for a loan, it is important to remember that the bank will scrutinise your payment-track records and your ability to repay the loan. Having other loans or liabilities can affect your eligibility for another loan. Banks may also consider the number of dependents in your family, as more dependents can indicate a lower repayment capacity.
Whether you apply for a loan against property online or offline, keep in mind that all owners of the property must be co-applicants. This is because the lender needs to be sure that all property owners have agreed to offer the property as collateral for the loan.
Property Pledged as Collateral
When applying for a loan against property, ensure that the property you use as collateral is not disputed. Lenders will not approve a loan request if the property is disputed or the property papers are unclear about ownership. It is recommended to pledge good collateral, such as a property located in a central location with high resale value and free from disputes. Doing so can improve the chances of your loan application getting approved quickly and getting better terms and conditions on your loan.
Compare Various Lenders
It is crucial to weigh your options when choosing a lender for a loan against property. Do not simply concentrate on the loan against property interest rate – also consider other costs, such as prepayment penalties, foreclosure penalties, processing fees, late payment fines, and the loan-to-value ratio. Considering all these parameters can help you choose the right lender for your needs.
If you choose to pay off your loan against the property before the end of its tenure, you may incur prepayment charges. These charges are typically a percentage of the outstanding loan amount and can vary among lenders. To avoid surprises, it is important to be aware of the prepayment charges before taking out the loan. You can also negotiate with the lender to ensure the charges are reasonable and fair.
In India, tax benefits are available on loans against property taken for either personal or business purposes. The interest paid on loan is eligible for a tax deduction under Section 37(1) of the Income Tax Act if the loan amount is used for business purposes. According to Section 24(B) of the Income Tax Act, interest paid on loan may be tax deductible if the money is utilised forpurchase or construction or repair or reconstruction of residential property., so it is best to speak with a tax expert for more information.
If you are considering a loan against property to fund your financial goals, it is important to choose a lender carefully. The loan application process can be complex and time-consuming, so looking for additional benefits that can simplify the process is essential. These may include easy documentation, doorstep service, and fast processing times. By selecting a lender that offers these features, you can ensure that your loan experience is smooth and efficient.