A loan against property is a type of loan where the amount is disbursed by keeping a commercial or residential property as collateral. Beneficiaries can avail loan against property benefits for a maximum tenor of 20 years and provide substantial monetary funds with competitive interest rates. Thus, prospective borrowers should know how to apply for loan against property to avail all benefits.
How to apply for a loan against property?
To apply for a loan against property, applicants must follow a few general steps:
Step 1: Visit the official portal of your preferred lender.
Step 2: Navigate to the loan against property option from the product menu.
Step 3: Fill up the online application form with personal, professional and property details and submit it.
Step 4: A representative from the lender’s end will contact the applicant to get further details.
Step 5: Finally, an applicant must submit documents to get his/her loan sanctioned.
As mentioned above, a property loan comes with several benefits. A few of the notable benefits of a loan against property are listed below.
Benefits of a loan against property
- Avail high loan amount easily
A loan against property is a secured financing option, where a property is kept as collateral. This secured feature of the credit form allows lenders to disburse a high loan amount against a lower interest rate. In case of defaults, lenders can sell the pledged property against the pledged asset. Resultantly, leading financial institutions provide a property’s maximum value to their borrowers.
Based on the property and location, lenders often provide an LTV of around 70 – 80%. In ideal cases, a borrower can avail of a maximum loan amount of Rs.3.5 crore.
- No end-use restrictions
As lenders often provide a wholesome value to a property, borrowers can use the fund to finance any expense. This may include, child’s abroad education, wedding, foreign trips and others. Most lenders don’t usually provide any limitation on the usage of funds availed against a property, thus making it suitable to fund both personal and professional needs.
- Claim tax benefits
Apart from using the loan amount on myriad occasions, borrowers are also eligible for certain tax benefits. These benefits are available under Section 37 (1) and 27 (B).
- If a borrower utilises the loan amount for business purposes, they can avail tax benefits on interest payable under section 37 (1) of the Income Tax Act.
- Additionally, under section 24 (B) of the Income Tax Act, applicants can avail a maximum tax benefit of Rs.2 lakhs if the fund is used to purchase a home.
- Lenient eligibility criteria than others
A loan against property eligibility criteria is less stringent than other types of loan, as the risk on the lenders’ side is comparatively less. Although eligibilities differ with lenders, few guidelines remain the same. Some pointers to note are –
- Applicants must be citizens of India.
- They should be between 25 – 70 years of age.
- Working professionals should have a minimum 3 years of work experience.
- Self-employed applicants must have a steady source of income.
- Competitive interest rates reduce EMI burden
Lenders often levy affordable loan against property interest rates on borrowers due to their secured nature. It is important to note that the interest rates depend on multiple factors; hence, prospective borrowers should learn about these before availing of a loan against property. Some of the factors affecting loan against property are –
- Loan tenor
- CIBIL score
- Applicant’s profile
- Property type
- Repay throughout an extended tenor
One more advantage of loan against property is the availability of an extended tenor. Most leading financial institutions allow borrowers to extend the tenor up to 20 years. This results in low EMI and becomes less harsh on the borrower’s pocket.
- Free usage of the EMI calculator
To ease the loan application, lenders provide borrowers with the benefit of using a loan against property EMI calculator free. This calculator gives accurate details regarding all financial breakups related to the loan against property, including the EMI. As a result, beneficiaries can plan their finances earlier.
Selected financing institutions extend offer pre-approved offers that simplify and expedite loan processing. Such offers are available on a range of financial products like loans against property, home loans, etc. You can enter your name and contact number to check your pre-approved loan offer.
Thus, from the above-mentioned details, applicants will get an idea of a loan against property regarding how to apply for a loan against property and its benefits.