What are the benefits of applying for a loan against property?

Demand for a loan against property has scaled heights in recent times. It is driving the market as borrowers can avail high quantum loan amounts by keeping their properties as a mortgage with financial institutions. Lenders decide the loan amount based on the property’s market value.

A loan against property is a secured loan as the property is kept as collateral. It can be used to fund a medical emergency, wedding event, expand business, child’s education etc.

What are the benefits of applying for a loan against property?

There are innumerable benefits of applying for a loan against property:

• Obtain high-value loan: As borrowers can pledge any property as collateral, a lender sanctions loan amount up to 70% to 75% of the property’s prevalent market price. These lump-sum funds can be used to finance any personal or business expenditure. 

• Affordable interest rate: As a is a collateral-based loan, borrowers have to pay a nominal interest rate on the loan amount. A lower interest rate in turn lowers the EMIs and hence is pocket-friendly. Competitive interest rate reduces one’s interest outgo, thereby reducing the total cost of availing the loan.

• Extended repayment tenor: Loan against property offers borrowers flexible repayment tenor which makes it a lucrative option. Borrowers get the option to repay the loan amount at their pace per the repayment capability. The longer the repayment tenor, the lower is the EMI payout and vice versa. However, one should note that a longer repayment tenor significantly increases the total borrowing cost. Therefore, appplicants must choose the tenor carefully.

• Instant approval: A loan against property is a popular option for its fast approval process. As it is a secured loan, lenders process the amount faster. Borrowers get approval within 24 hours. To get an instant approval for the fund, borrowers must adhere to loan against property eligibility criteria.

• Continued usage of property: One of the significant features of this loan is one does not lose ownership of the property after mortgaging it. Borrowers can continue to use it while repaying the loan amount.  

• Loan against property tax benefits on interest payments: Borrowers use loans against property as a tax saving instrument. Under section 37 (1) of the Income Tax Act, 1961 one can claim deduction on the interest paid on the loan amount for business purposes. Under section 24 (B), one can claim tax reduction on the interest component up to Rs.2 lakh. However, borrowers will have to provide sufficient proof regarding the use of the funds.

• Loan against property balance transfer facility: It is one of the standout features of availing a loan against property. Through a balance transfer facility, borrowers can refinance the loan amount or transfer the outstanding balance to another financial institute if they feel that the present interest rate they are paying on a loan amount is higher than the current market rates.

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• No limitation on end usage: It is perhaps one of the most significant features of a loan against property. Once the amount is disbursed, borrowers are not liable to show how they are going to use the sanctioned loan amount. They can use to meet any financial need.

• Online calculators: Borrowers can make use of the lap EMI calculator to compute monthly payables. Moreover, borrowers can manage their loan accounts anytime and anywhere they want.

Furthermore, borrowers have to pay a nominal amount as prepayment charges if they want to the pay loan amount before the tenor. For some lending institutions, borrowers have to zero prepayment charges in the case of a loan against property. Financial institutions offer doorstep services where a representative will come to the borrower’s place to collect necessary details before disbursing the loan amount. 

Furthermore, leading financial institutions extends pre-approved offers on financial products like loans against property, home loans etc. These offers expedite the lending process and reduce the hassle of documentation. Potential borrowers can check their pre-approved offers by submitting details like their name and contact number.

On the whole, a loan against property helps an individual manage big-ticket expenditures with ease. It covers all sorts of expenses that would otherwise have a negative impact on one’s financial wellbeing.