A loan against property refers to the loan which is availed by keeping the property or asset as collateral with the lender until the loan amount is paid back. People are nowadays considering availing loan against property for several reasons, including personal reasons such as a big wedding, foreign trip, buying property, education of children, and commercial reasons. Moreover, the reason for the rising popularity of loans against property is it is cheaper than a personal loan and other loans because of the advantage of occupying the property even after the loan is taken.
It is form of secured borrowing, which is also called a mortgage loan. The rate of availing of a loan against property is expected to grow by twenty to twenty-five percent in the coming years. A loan against property is easy to avail, and several reliable sources such as banks, NBFCs, and lenders are ready to sanction it. But several important factors should be considered before taking the loan to obtain maximum benefits. Given below are some of the major factors that one should consider before taking a loan against a property.
- Loan Amount
It is important to sanction only the required amount and not a big amount just because the loan is easy to take. The loan amount is determined by the market value of the property and the condition of the property. The loan amount is usually 50-70 percent of the market value of the asset.
Properties with low risks, such as being in a good locality, or having a higher value, will help the individual in availing quick loans against property. The employment status determines the maximum amount that one can avail of a loans against property. For example, salaried individuals can avail of an advance of up to 1 Crore while the maximum limit of availing loan for the self-employed individuals is up to 3.5 Crores.
- Interest Rate
The rate of interest offered on loans against property is cost-effective and low in general since they have reduced risk. The interest rate varies from lender to lender, and hence one should compare and then take the loan from the lender offering the lowest rates.
The interest rate charged by the lender on loans against property is determined by the type of property and its market value, along with age, occupation, income, and several other factors. The repayment tenure also determines the interest rate. The longer the tenure is, the lower the interest rate will be, and vice-versa. Moreover, the individual’s credit score must be seven hundred and above to section the loan and get a lower LAP loan interest rate.
- Tenure of repaying the loan
The tenure of repaying the loan amount is also an important factor that the individual should consider before availing loan. The tenure of a loan against property is generally longer and can be up to twenty years. But one can easily pay back the amount in convenient monthly instalments, unlike regular loans where the longest tenure is just five years, and one has to pay back the amount in hefty EMIs which might not be feasible. Moreover, the tenure also determines the interest rate charged by the bank. The longer the repayment tenure, the lower the rate of interest charged.
- Tax Benefits and hidden charges
Other than EMIs, there are several hidden charges, such as document charges, processing fees, administrative fees, legal fees, and a few more that the lender will levy on the loan against property. Other than these, one should also be aware of the tax benefits or no tax benefits on loans against property.
These are some of the factors that should be considered before going for a loan against a property to avoid any mishap or loss. The loan against property is proving to be advantageous for both salaried individuals and businessmen. Hence, it is being availed by numerous people in recent years through reliable sources.
PNB Housing is a good and reliable source to avail loan against property as it provides low-interest rates and is convenient. Overall, it can be said that a loan against property is a good deal, and taking it from PNB Housing is the best deal.