Fund Your Requirements With A Loan Against Property In India

  • Added:
    Feb 27, 2014
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Fund Your Requirements With A Loan Against Property In India Photo by Aishwarya Mahurkar

Most people in India are wary when it comes to opting for loan against property . While the cautious approach is justified, there are advantages to this approach. A big factor working in its favour is the fact that this is a secure loan. As long as the amount being borrowed is around 40 to 70 percent of the evaluated price of the property, the loan should be processed and approved quickly.

Some people prefer this over personal loans because the former comes with lower interest rates as well as affordable EMIs. While the base purpose for both the loans is almost the same, the eligibility criterion for a personal loan is relatively tougher as repayment ability is established by a regular and reliable source of income. A loan against property, though, functions differently as the loan amount is determined against your property value. The interest rates for loan against property vary from 12 to 15.75 percent whereas for a personal loan, it ranges anywhere between 16 to 25 percent. Factoring in the difference, it makes sense to look at this option for the ease of repayment.

What could be considered the right reasons for taking this loan though? People often take this loan up for reasons that cannot be easily categorized into established loan categories. What will you do, for example, if you want to expand your business but can’t get your bank to give the needed business loan? Do you have enough funds to get your daughter or son married? Do you have funds for their school or college education in India or abroad? How can you arrange funds for urgent medical treatment for loved ones?

When faced with these difficult choices, mortgaging your home or official property for the loan stands as an alternative. It is important though, to keep in mind that most banks ask for a number of documents based on the person’s profession or business. There are also certain eligibility criteria that must be met for an approved loan against property in India . You must demonstrate repayment ability through a consistent source of income, existing loans, repayment track record and assets. Apart from these factors, the approval process will also include verifying the cost and legal documents of the property. These verifications make processing the loan a longer process when compared to a personal loan.

While it can be easy to want to take up this loan for its cost effectiveness, you should be cautious about the terms and conditions before signing on the dotted line. Take all the factors including pre-payment clause and interest rate into account to ensure that everything fits your monthly cash flow. It is important to realize that this is a financial commitment that could stretch for several years. Keeping this in mind, many financial experts urge that users be cautious and aware of their exact requirements before moving forward.

Author's Profile

Aishwarya Mahurkar is an experienced writer concerning the finance industry. Her articles help in informing her readers of the different types of home loan products such as Housing loan, Home improvement / renovation loan, opting for loan against property, land / plot loan & processes that cover approved loan against property in India

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