Loan Against Commercial Shop In India

If you are looking for sizeable funding, you can opt for a loan against commercial shop. You can use this property loan to fund your expansion or buy expensive machinery. We have gathered the best and most relevant information about property loans. In this article, we will tell you why it is a good idea to collateralize your commercial property against loan. We will also tell you how to apply for a loan against commercial shop.

What is a loan against commercial shop?

A loan against a commercial shop is a type of loan in which you mortgage your commercial property against loan.You can get approximately 70% of the current market value of your mortgaged property as property loan amount. You can use a rented, self-occupied, or vacant

• Office space
• Shops
• Showrooms

You can use this loan amount to buy raw materials or invest it in advertising. Banks, NBFCs, or digital lenders provide loan against commercial shop. You can pledge ready-to-use and fully constructed commercial property against loan. These properties should be litigation-free and must have all the required permits and approvals from the respective authorities. However, you can’t use under-construction properties to avail of this loan.

Eligibility Requirements for Getting Loans Against Commercial Property

To qualify for the property loan, you must meet the requirements listed below:

• You must be an Indian national.
• You must have a regular income.
• The commercial property should be fully constructed.
• There shouldn’t be any legal concerns.
• You must have a credit score of 750 or more. 

Documents Required for a Loan Against Commercial Property

Documents required to apply for this property loan are:

• Address and identity proof: Aadhaar card, PAN card, passport, voter’s ID, or driving licence You can use one of these documents for identity and address proof.
• Income Proof: You can use ITR filings and bank account statements as proof of your income.
• Documents related to property: For pledging property against loan as collateral, you will also need documents related to the property. It could be the title deed, buyer agreement, certificate of occupancy, or letter of allotment. 

Your lender could ask for more documents, so make sure you have all the documents that you might need to obtain this loan against commercial shop.

Things to Consider While Going for a Loan Against Commercial Shop

Taking a property loan against your commercial shop might sound like a good idea. However, it is not always so. Here are some things you should consider before you put your property against loan as collateral.

1. Collateral

To be eligible for a loan against commercial shop, you must first own a business property. It may be a store, office, factory, or another type of commercial building. According to the lender, the requirements can change. To get the loan, your business property will be mortgaged, so you should have legal ownership.

2. Payback period

The maximum payback period is 15 years. However, it can vary depending on the policy of the lender you have chosen. Pick the payback tenure you are comfortable with.

3. You are being charged interest

Generally, if you have mortgaged property against loan, you get a cost-effective interest rate. So, compare the interest rates various lenders are offering. Make sure you are receiving the most reasonable offer for your asset. People tend to miss out on a lot in this case.

Find a bank or lender who will provide you with an affordable interest rate for property against loan. It would be best if you put some effort into your research. Even insignificant variations in interest rates have a significant impact on your ability to repay the loan in the long term.

4. There are additional costs.

Loans of any kind come with additional costs. There will be stamp duty and state fees. Certain lenders may also charge service fees, prepayment fees, and statutory fees.

So, it’s crucial to include all those fees when calculating the actual cost of taking out the loan. These fees can appear insignificant. However, they have the potential to reduce the cost of borrowing the loan and have a role in your capacity to pay it back.

5. Processing Fees

You would have to pay certain fees, generally referred to as “processing fees.” They would cover things like registration fees, legal costs, brokerage fees, and loan assessment fees. You will have to pay a processing fee of 1% to 2% of the loan amount, depending on the lender.

6. Real Estate Appraisal

Loan against commercial shop is given in exchange for collateral, as the name implies (in this case, a shop). The bank’s representative values your property against loan to establish the maximum loan amount the bank is willing to offer.

Also, the bank bases the loan amount on the property’s current value. The maximum loan amount that you can receive is also 70–80% of the value of the property. You should assess the loan-to-value (LTV) ratio offered by banks in light of these considerations.

Also, check the value of your property and see if there are chances it will go up shortly. If there are chances of a rise in your property value, waiting will get you a higher loan amount than now.

Summing-up:

This article aims to provide information about factors that you must know before going for a loan against commercial shop. Before making the decision, know all about it. Pay attention to the information mentioned before while making any decisions.

Also visit, Piramal Finance for more in-depth, educational articles.