Loans secured against property are versatile financial products provided by lending institutions and banks, wherein a property owned by the borrower serves as collateral. These loans enable borrowers to access funds amounting to 60-80% of the property’s market value. Despite the property being mortgaged to the lender, the borrower retains the right to utilise it for residential or commercial purposes. Should you contemplate obtaining a loan against your property, the following are several inquiries that you may have.
Q1. What sets apart a loan against property from a home loan?
While a home loan pertains specifically to the acquisition of a residential property and is secured by a bank or lending institution, a loan against property serves as a versatile financial product. By utilising real estate as collateral, it enables borrowers to access funds for a diverse range of purposes, including but not limited to expanding their business or financing their child’s higher education.
Q2. What advantages are associated with obtaining a loan against property?
Typically, a loan against property offers a notably lower interest rate compared to personal loans. Furthermore, the loan amount accessible with a loan against property is considerably higher, and the repayment period can be extended significantly. Nevertheless, it should be acknowledged that the interest rate and repayment tenure offered will vary based on various factors, such as income, property valuation, loan amount, and other relevant considerations. Moreover, lending institutions and banks typically impose a lower processing fee for loans secured against property in contrast to personal loans.
Question 3: What are the eligibility requirements for obtaining a loan against property?
While the specific eligibility criteria for obtaining a loan against property may differ depending on the banking institution or lending agency, there are some common overall eligibility requirements. The loan is available to both salaried individuals and self-employed professionals. Co-applicants can include close relatives, partnership firms, or even private limited companies. The primary applicant must be at least 21 years old and a resident of India. However, some institutions also provide loans to non-resident Indians (NRIs). Additionally, you must earn a certain minimum monthly income that demonstrates your repayment capacity to meet the Equated Monthly Installment (EMI) payments. Lastly, it is essential to have a good credit score, as this will also impact the interest rate applied to the loan against the property.
Question 4: What types of properties are eligible for loans?
Contrary to a prevalent misconception, loans are not solely restricted to residential properties. Lenders and financial institutions actually accept a wide range of properties, encompassing both residential and commercial properties. Surprisingly, even undeveloped land can serve as collateral for obtaining a loan against property. Depending on the specific bank or lending institution, borrowers can typically secure a loan equivalent to approximately 60-80% of their property’s market value, regardless of whether it is residential or commercial in nature.
Q5. Which documents are necessary for applying for a loan against property?
The documentation needed for a loan against property may differ among various banks and depend on whether you are a salaried individual or self-employed. Generally, you will typically need to provide proof of identity and residence, such as government-issued identification documents or utility bills. Additionally, you will usually be required to submit salary slips or income tax returns to verify your income, along with a check to cover administrative or processing fees charged by the bank. Furthermore, you might also be asked to furnish bank statements, credit score reports, educational qualifications, and company balance sheets, among other documents. It is important to carefully review the specific documentation requirements for a loan against property before submitting your application.
