The good and the bad of Loans against Properties
Whether you have an idea that you want to materialize or simply want to buy something you have your heart set on, a loan is probably your safest bet. There are various types of loans you can choose to avail, one of which is a loan against property. In this article, you will read about the pros and cons of taking loans against properties.
What is a Loan against Property?
This loan is where you pledge your property as collateral to avail the services of a financier. It acts as a security measure for institutions because it means if you default on repaying your loan, the bank or NBFC can take your property. Although you might be wary about using your property as collateral, this loan is considered the most ideal if the amount you are looking to borrow runs into 6-digit figures. The loan against property interest rates are usually lower than that of other loans. Take a look at the rates offered by companies like Bajaj Finserv to see a classic example. Like with any other loan, your EMI payments can be calculated using a specific EMI calculator for loan against property. Just like how personal and property loan advantages factor into your borrowing decisions, the advantages of taking loan against property also are vital.
The Upside to Loans against Properties
- Big Loan Amount Means Longer Tenure
The larger the loan, the longer you have to pay it off. Since the duration of the repayment period is extended, the EMI you pay on the loan is not as high as other loans. The duration also means that the interest calculated on the principal is lower than other loan rates.
- The Type of Property is Irrelevant
Whether you own a residential property or a commercial one, you are still eligible to get a loan approved. Organisations like Bajaj Finserv offer lists of loans that could be sanctioned, so make sure you do your research before committing yourself to a particular product.
- They are Classified as Secured Loans
Since you are putting up property to act as security for the loan, it becomes a secured loan. The reason this is an added bonus is because secured loans help build your credit.
The Downside of a Loan against Property
- You Can’t Specify How Much
When you apply for a loan against your property, you can’t ask for a specific amount. Based on the evaluation of your property, the lender would estimate the maximum loan amount that can be lent to you.
Stricter Eligibility Criteria
The criteria you have to meet in order to get an approval is a little more extensive than that of other loans. The dominant factor that NBFCs look for is the income of the applicant.
- Financiers Tend to Value Property Lower Than Market Rate
Since the collateral evaluation is carried out by the lender, the final figure quoted is often lower than the actual market value of the property.
When you look into getting a loan against your property, make sure you do the research before making a decision regarding where and when. Some companies like Bajaj Finserv let you apply online for property loans and loans against properties.