A loan against assets, like property, is one of the most sought-after loan types. Not only does it provide you with a considerable loan amount, but it also gives you a tenure of 15 years to repay the loan. Before taking a loan, it is imperative to research it and understand its pros and cons. Factors like loan against property interest rate and additional charges or fees that lenders levy should be considered before you take the loan. We have tried to ease your burden and have come up with three important things you should consider before you take a loan against property.
What do we understand by Loan Against Property?
A loan against property is a loan you get through mortgaging your property to the lender. It is a secured loan that you can use for any purpose. Once you have repaid the loan amount, you get the property ownership documents back from the lender. These loans come with a reasonable interest rate. The documentation process takes a few weeks as the bank evaluates your property on various parameters. Let us look at some factors you should consider before applying for a loan against property.
The market value of your property
The loan amount you can get through a loan against property will depend upon your property value. You should know the actual market value of your property. The value of your property will depend upon factors like size, location, and age of the property. The builder’s reputation and the amenities in the property are also some minor factors that affect its value. You need to consider all these factors and know the exact value of your property before you pledge it to the lender. It will help you to get the right loan amount. Also, being aware of your property value will ensure that you get the right bargain from the lender, either in terms of the loan amount or the interest rate. A high-value property will also ensure that your loan gets approved quickly. The amount of loan you get through your property will not be the exact value of your property. A lender can only give you a loan of around 60-70% of your property value.
Researching Interest Rates and various Charges of lenders
You should conduct thorough research about the loan against the property interest rate of various lenders. You should also evaluate the charges lenders take for a loan against property. Most lenders will charge an interest rate of 8-10% per annum for a loan against property. Depending upon your trust and comfort, choose the lender that is suitable for you. Researching on the internet and reading reviews of other loan recipients is a good way of finding the best land mortgage loan for you. Some banks give concessions on charges like processing and legal fees. You should check for these prices before you decide upon the lender. Doing this research for your land mortgage loan will help you make the right choice and help you save your hard-earned money.
Repayment Tenure
Along with the interest rate, the repayment tenure is the most crucial factor in a loan against property. You should evaluate your financial capacity and understand the total time needed to repay the loan. Depending on this, you should pick the lender that gives you a healthy tenure to repay the loan. A longer-term would mean a higher cost of borrowing. So, calculate the term that best suits your finances. If you opt for a longer tenure, you will have to pay lower EMIs every month, but your cost of borrowing will increase. Keeping an estimate of the loan amount you need would also help you make this decision. Calculating your finances to the last penny will help you understand the time needed to pay off the entire loan without burdening yourself with a higher interest rate. The maximum tenure a lender can give for any loan against property is around 15 years.
Read a similar blog: Benefits of Using EMI Calculator before Applying for a Home Loan
Conclusion
A loan against property is one of the most beneficial loan types. If you understand its key features, you can easily get it approved by any lender. Keeping track of the points mentioned in this article will help you be in command while applying for a loan against property.
