Loans are financial aids that help you achieve your goals and dreams, but some factors influence them. Do you want to apply for a loan against property, but do you lack knowledge regarding it? If yes, then this article is simply the best fit for you to find out.
In this article, you will come across mortgage loans, their benefits and disadvantages, and things that you should keep in mind before you apply for one.
Loan against properties: definition and features
A loan against property is financial assistance you take from a bank by keeping your property as collateral. Banks sanction your loan by keeping your property as a form of security to ensure that you repay your loan on time. This property can be a piece of land that you own or a house. Until you repay the loan, banks keep this as collateral, and once you complete your repayment, you get back your property.
This will be a good option for you, especially if you don’t have any other option that you keep as collateral, like your shares. So, it could be a good way to get a loan against properties. You’ll have plenty of time to repay your loan in small installments.
What are some of the benefits of applying for loans against properties?
Here are some of the exclusive benefits of applying for a loan against property:
- Appealing interest rates:
Banks often charge you a low rate of interest, and often it starts at 9.50% per annum. This is an advantage of taking a mortgage loan, you are charged a low rate of interest. You can easily pay off this debt in smaller instalments at regular intervals.
- Quick disbursal:
You get the money in your hand mostly within 3 days, which is another advantage of applying for a mortgage loan. If you own a property with a high market value, you will be approved for funds in a short period of time.
- Long repayment tenure:
Besides having a low mortgage loan interest rate, the tenure of repayment is often long. The tenure varies by bank, but it is typically between 15 and 20 years.
- Transparent processing:
The processing of mortgage loans is very transparent; nothing happens under the hood. There are no hidden charges or extra fees, and most importantly, there is a zero to minimal processing charge.
- High loan amounts:
Often, you get the chance to ask for as much as 65% of the market value of the property that you used as collateral. This is a huge advantage for applying for a loan against the property because the loan amount might be huge if your property has a handsome market value.
What 7 things should you keep in mind regarding loans against the property?
Here are the seven things you should keep in mind before applying for a loan against any of your properties:
- Evaluate the right market value of your property before you apply for a loan against it
Before you decide to apply for a mortgage loan, you must make sure that you know the correct market value of the property that you are going to keep as collateral. This will help you pitch it right before the banks and land a better deal.
- Have a look at your credit scores
Your credit scores matter a lot to banks, especially because a good credit score ensures that you can pay the loan. So, try to improve your credit score and make sure it reaches the mark of 750, which is a very good number.
- Smartly compare the different interest rates of different lenders
You can use a loan calculator to calculate different interest rates that are provided by different banks. Make sure you at least try looking for 20 banks and compare all their rates, and then choose the one that suits your requirements.
- Look up the documents and eligibility criteria before applying for a personal loan against property
See what documents and eligibility criteria banks expect from you for a mortgage loan. Go through every bank and read their requirements, and if possible, make sure that you are fit to apply for it.
- Check the EMIs and the interest rates of different banks by visiting their websites
This is also an important step in applying for a loan against the property because, unless you know how much you are charged and how much you are going to pay, you can’t make an informed decision.
- Analyse how much money you require in the form of a loan
Since your property is at stake in a mortgage loan, you should consider taking the amount you need. Don’t think of taking a huge amount just because your property is worth a lot. The reason is that it might get tough while paying your monthly interest.
- See if there are any extra charges or fees for applying for a loan against property
Sometimes banks might not inform you but might have extra charges like statutory charges, prepayment charges, stamp duty, consultation charges, etc. Make sure you talk it out with your bank before applying for a mortgage loan.
The interest rate for loans against property ranges from 8.0 percent per annum to 15 percent per annum. There are even banks that go below 8.0 percent, especially if you have a good property evaluation and a decent credit score. Make sure you use a loan calculator to spin different interest rates and see what outcomes suit you the best.
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