Arranging cash during
times of need can be challenging. People mostly rely on a high-interest
borrowing option to sail over short-term financial emergencies, only to realise
later than the repayments are even more challenging.
But, when a loan against property is available at the
lowest interest rate, why should you select a high-interest option? This
article unearths every fact about a loan against property for you to decide
whether it is a good idea or not.
What is a Loan Against Property and Who Can
Apply For It?
You can apply for a
loan against property if you own a property, either residential or commercial,
as a single owner or jointly. To get the loan, you need to mortgage your
property or deposit it as collateral security. While you will continue to stay
in the property or use it for business purposes, the lender will hold the legal
rights to the property. The asset serves as a guarantee which the lender may
liquidate in case the borrower fails to repay after repeated requests to repay.
What are the Major Benefits of a Loan
Against Property?
While it is true that a
loan against property often offers the lowest interest rates, there are many
other benefits that may help you to decide whether it is a good idea or not.
One Loan For All Purposes
Generally, when people
want urgent money for fulfilling the various needs of life, they prefer credit
cards or personal loans. However, a loan against property can offer you the
same freedom at a much lower rate of interest. You may use the funds to sponsor
a wedding, pay hospital bills, consolidate business debt, construct a house,
renovate your home, purchase a motor vehicle, etc.
Extended Tenure and Low Interest Rate
A loan against property
usually comes with a repayment term of twenty (20) years. Also, the lowest
interest rate of a loan against property starts from 9.50%. The combination of
long tenure and low interest can enable you to save more than any other form of
credit. Most lenders provide an online EMI calculator for you to calculate the
cost of the loan and the amount you need to pay every month. You can change the
parameters to increase or decrease the loan amount and EMI until you arrive at
the right amount.
Check: Loan against property
interest rate
Easy Application Process and Quick Loan Disbursal
A loan against property
not only offers you the lowest interest rates but also an easy application
process, relaxed eligibility criteria, and fast loan processing. As it is a
secured loan, any salaried or self-employed professional/non-professional can apply
for the loan. You will often need to submit a few essential documents like
identity, age, and address proof, and income proof, along with property papers
and loan processing fee. Once the physical verification of the property gets
over, you can expect the funds in your bank account.
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High Loan Amount
Unlike other loans
which have a limit on the maximum amount you can avail, there is no such upper
limit on a loan against property. Generally, lenders approve an amount
equivalent to up to 60% of the asset's current market value. Other than the
asset value, other factors which play a role are the asset's age, location,
legal status, and condition.
Conclusion
If you are looking for
a financing option with the lowest interest rate, a loan against property is
not a good but a great idea. Remember to go through the loan terms before
availing the loan and negotiate with the lender, if there is such a scope.
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