Loans against property Myths
It is a market full of endless possibilities where anything can happen at any time. When it comes to mortgage loans, one of the most significant finance options is a Loan against Property. However, since these loans do not require collateral against them and have minimal eligibility criteria, the amount that can be availed as a personal loan is less as compared to what can be assisted from secured loans. In case you want considerably high funds, then taking a loan against property is a better alternative. But, most people cease availing of such loans because of some myths associated with it. However, there is no reason to worry. To reassure you further on this, here are 6 common loans against property myths.
1. You can only take loans against residential property
Perhaps the most common myth among most borrowers is that you can take a loan against property only on residential properties. However, that is not the case. You can get a LAP for both, residential as well as commercial properties. In turn, you can use the LAP to acquire commercial or residential property or for lease rent discounting.
2. You require to have a high income to avail a loan against property
Contrary to popular belief, you need not fall under the ‘high-income section’ to avail of a LAP. Most loan providers have set income eligibility for salaried as well as self-employed individuals to avail of this type of loan. However, as long as you can assure them of your loan repayment capability, it would not signify whether you earn a high income or not.
3. You have to pay high-interest rates
Because of the escalating property prices these days and the consequently high amount availed as a loan, most people assume that the interest rates on a loan against property would also be high. However, one needs to know that LAP interest rates depend on several factors. These cover the amount that needs to be borrowed, loan tenure, type of property, valuation of your property, etc. As a result, the interest given by different loan providers differs. However, most loan providers allow a range of options to negotiate the interest rates on LAP depending on how much your credit score is and the estimated rate for the property.
4. You can’t use the property used for a mortgage
Most borrowers worry that once they mortgage their property for a loan, they cannot utilize the property anymore. However, this is not valid at all. Yet after taking a loan against a particular property, the borrower can enjoy the complete right to use it. Usually, the property that most borrowers pledge for a loan is their residence or commercial shops that they use for doing their daily business. During the period of taking a loan against such properties, they worry about losing their residence or shop. However, there is no need to bother. As long as the borrower does not default on his or her loan payment EMIs, he/she can enjoy living in the house or use the shop that is mortgaged with the loan provider.
5. The approval process is stringent
While availing of a personal loan is very simple, these days, availing of a LAP is likewise not much of a hassle. As long as the borrower matches the loan against property eligibility criteria laid down by the particular loan provider, he/she can easily avail of a loan.
6. Borrow loan amounting to the full value of property
Normally, when you appeal for a LAP, your approval is admitted due to several factors. One point to note is the current market value of the property. Once the bank or NBFC determines this, it comes at a sanction based on the loan-to-value ratio. The rate discriminates from lender to lender; you can avail anywhere between 75%-90% of the property’s value as a sanction.
These were some of the loans against property myths. If you want to be conscious of the same in a detailed way, India’s best financial advisor, then Terkar Capital can help you. It does not just offer you an opportunity to compare loans from private/public sector banks but also supports you get the loan in a hassle-free manner.
Learn more from the FAQs on Loans against the property.