A mortgage loan is a secured loan so the risk of default is low as the bank or NBFC has your property with them as collateral. Due to the reduced risk, the interest rates on such loans are relatively lower.
New Delhi: Loan against Property is a type of personal loan. These are secured loans offered by banks and NBFCs using one or more properties owned by the borrower as the collateral. It is also known as mortgage loan. One can avail these loans for commercial property or residential property collateral. The property is mortgaged and a fixed percentage of the present market value of the property is given to the borrower as a loan.
Though the property is mortgaged with the lender, you are still allowed to continue using it for residential or commercial purposes. These loans are considered a better option compared to a personal loan because the rate if interest is comparatively lower. These loans are convenient to repay due to the relatively low interest rate.
You can avail loan against property for:
1. Expanding your business, children’s marriage, medical treatments, Sending your child abroad for higher studies abroad etc.
Features of Loan against Property:
1. NBFCs generally offer higher loan amount for longer tenure at lower interest rates compared to other loans.
2. Loan against property is disbursed quickly without much hassle.
4. Both Residential and commercial properties are accepted as collateral.
5. Loan against property is an extremely good debt consolidation tool.
Benefits of loan against property:
1. Loans against property are secure loans which means that these loans are only offered when you offer a property owned by you as security.
2. These are long-term loans and repayment periods can be anywhere between 10 years to 15 years.
3. The amount you can borrow as loan against property ranges from Rs 300,000 to Rs 1 Crore.
4. The rate of interest for the loan and the loan amount varies on a case to case basis depending on the type of property and other terms specified by the lender.
5. Banks levy administrative charges on the applicant incurred while processing the loan application such as property valuation, processing fee etc.
Eligibility for loan against property:
For salaried individuals, professionals and self-employed businessmen, the loan against property eligibility requirements are quite similar. According to the eligibility criteria to avail Loan against property one:
1. Must be an Indian national, 21-years-old or above at the time of loan application submission.
2. Must have been employed by the present organization or should be involved in the present business for a specific number of years.
3. Meets the minimum required salary as well as monthly repaying capacity.
4. Have a good credit history with a proven track record of timely loan EMI and credit card bill repayment.
Document required: Depending on whether you are a salaried, self-employed professional or self-employed businessman, banks ask for a different set of documents. The documents required for loan against property are:
1. For Salaried Individuals: Identity proof, residence proof such as Aadhaar Card, Voter ID Card, salary slips for past 3 months, Form-16 issued by the current employer, bank statements of salary account for the previous six months, A cheque covering the administrative costs/processing incurred by the bank in processing the application.
2. For Self-employed Businesspersons: Identity and residence proof, educational qualification certificates, degrees, diplomas, and other academic credentials, Income Tax Returns of three years preceding the one in which loan is applied for, bank statements of six months preceding the one in which loan is applied for.
3. For Self-employed Professionals: Identity and address proof, educational qualification certificates, all registration/licensing certificates of your profession, business existence proof/business profile details, previous three years’ balance sheets and P&L Statement of the company, Income Tax statements of the company and self for last three years and past six months’ bank statement.
Interest rate: Mortgage loan is a secured loan so the risk of default is low as the bank or NBFC has your property with them as collateral. Due to the reduced risk, the interest rates on such loans are relatively lower close to the base rate. The rates start from as low as 8.6 per cent. Different banks offer loans against property with options of fixed interest rate and floating interest rate
For those who are not aware, the fixed interest rate remains stable throughout the loan tenure. However, floating or adjustable interest rate is not fixed and remains static. This type of interest rate varies according to market conditions.