There are several instances in life when a large sum of funds is required. These may include weddings, accidents, further studies and more. However, there are various options available for you. Securing funds through unsecured and secured loans is one of those options.
If you require a huge amount of funds then go for a personal loan or a property loan. There are various other loan options available if you don’t wish to go ahead with these. However, there are distinct benefits to getting a personal loan and a property loan. If you have a perfect credit score and are confident of not missing your EMIs then go for a property loan. There are various benefits to getting a property loan.
What is a loan against property?
A loan against property is a secured loan for individuals or businesses that need funds for personal or business purposes. You have to put up your commercial or residential property as collateral with the bank to receive a loan against the property.
It is a flexible loan option that provides various benefits mentioned below. Before choosing to get a property loan you should check out the interest rates provided by various lenders, the principal amount you can receive for your property, and the duration the banks are offering.
You should also look at the documentation process as it doesn’t have to be tiring for you. A property loan usually has attractive interest rates and longer tenure with hassle-free documentation. You can simply and easily repay your loan through monthly instalments.
A loan against property is used for various purposes such as marriage expenses, emergency medical expenses, business expenses, or other personal needs.
Benefits of Loan Against Property
There are various benefits of property loans that you should know before applying for one. These benefits may help you in easing the process of applying for a property loan:
- Availing a large principal amount
You can receive a large principal amount as while applying for a property loan you put your commercial or residential property as collateral. The principal amount is decided on the value of your property. The maximum principal amount you can get is 70-80% of your property’s value.
The ratio may also differ if the property is residential or commercial. You can utilize the funds to finance your personal or business expenditures. You cannot access such large sums in personal loans
- Lower interest Rate
As a loan against property is a secured loan the interest rate provided on the loan is less. The interest rate is less as the bank’s risk is reduced and any losses incurred can be set off by selling off the property.
The less interest rate can benefit you in future monthly loan payments as it minimizes your overall cost of borrowing. If you choose an unsecured loan like a personal loan then you might have to pay a higher interest rate for a longer duration.
- Longer Repayment Duration
The repayment duration is one of the major benefits of choosing a loan against property. If you have chosen a property loan with a large principal amount then it is helpful for you when you’re repaying the loan. The long tenure and the low-interest rate make it a feasible option to choose.
- Tax Benefits
You can receive tax benefits on getting a property loan. The tax benefits are on the interest payments and are only applicable if you use the sanction for particular reasons. According to Section 37(1) of the Income Tax Act, you can get a deduction when you use the property loan for business expenditures.
You can also get tax benefits on interest paid and processing fees. If your property is residential then you can get a tax deduction under section 24(B) of the income tax act, 1961.
- Pre-closure charges
When you’re closing your property loan before the end of your tenure you don’t have to pay any pre-closure charges.
The documentation process of a property loan is simple and convenient. The documentation includes a clean and original deed of the property.
The loan against property allows you the flexibility of spending your loan amount for any purpose, unlike other loans. Gold loans or automobile loans are supposed to be spent for a specific purpose.
- Various property options
You don’t have to worry if your property is residential or commercial. You can receive a property loan on any type of property. The property options are flexible. This would make taking a loan simpler and use of the property efficiently.
- Approval process
The approval process for a loan against property is quite easy when compared to other loans. Documentation requirements are minimal and some institutions also provide doorstep facilities.
During the repayment period, the borrower has ownership of the property, so if he is unable to repay the amount then they can sell the property to pay off the loan.
Loan against property can be used by individuals as well as businesses and is very flexible when it comes to property. The banks provide loans on residential as well as commercial property. Property loans come with flexible loan amounts, lower monthly payments, longer tenure of the loan cycle, fewer interest rates and high eligibility.
The overall financial burden on the borrower is low and he can constructively utilize the rest of his spending income. If you’re thinking of getting a property loan do check out Piramal Finance’s loan against property. You can also check your monthly payment on the EMI calculator.