A loan against property offers considerable funds that can help you purchase factory space, finance your child’s education abroad, fund a wedding in the family, or use it to consolidate debt. But, before you take this loan, it is important to ensure that you aren’t falling prey to the many myths that shroud it. So, to ensure that you’re basing your decision entirely on facts, here’s a look at 6 myths about loans against property, and the truth behind them.
Myth 1: It is better to take a loan at a higher interest rate than having your home as collateral
If you have a healthy credit history, are timely with your payment, and are confident of not missing your EMIs, then there are a few financial options that are better than a LAP. But, a loan against property provides you with high-value funds at comparatively lower interest rates than other loans. It's a financial instrument where you keep your home or other property as collateral to avail funds.
Keeping your home as collateral should never be a problem if you work according to a fixed repayment plan of the loan. Therefore, it is like any other loan. However, as compared to other loans, a Loan Against Property is an intelligent financial tool that supports you in the long run and helps maintain stability.
Myth 2: You cannot use the property that you pledge
It is often believed that you can’t use the property that you pledge when taking a loan against property. This is false. You have complete freedom to use the property that you have secured funds against throughout the tenor of your loan. The property will only come under the financial institution’s ownership if you default on your loan. In this case, the lender has the right to sell the property to raise funds from it.
Myth 3: You can borrow a loan amounting to the full value of the property
Your pledged property’s total value will never be given to you in the form of a loan. In most cases, lenders give 75% to 90% of the value as a loan, though the exact figure depends on its resale value and the lender’s policies. So, estimate the value of the property that you are planning to pledge and accordingly arrive at the approximate value of the loan.
Myth 4: You can only get a loan against a residential property
This is far from the truth. You can receive a loan against property by pledging either a commercial or residential property. In turn, you can use the loan amount to buy commercial or residential property or for lease rent discounting. When you take this loan from Bajaj Finserv, a fourth option is available to you. You can get funds in the form of a Flexi Loan that you can use as you deem fit. With this facility, you can withdraw funds from the total loan amount as and when you need to and pay interest only on what you use. You can also choose to pay interest-only EMIs and repay the principal at the end of the tenor. You can withdraw, repay, and re-draw funds as many times as you want to during the tenor, and you don’t have to worry about filing a fresh loan application each time. So, opt for a mortgage loan from Bajaj Finserv and make the most of the Flexi Loan facility, nominal rate of interest, flexible tenor, and quick approval.
Myth 5: You need to be of a high-income bracket to apply for the loan
Although your income does affect your loan application’s approval, as it determines your repayment ability, it is not a hard and fast rule for you to fall under a high-income bracket to avail the loan. You can avail this loan as long as you can show the lender that you are competent to repay the loan amount within the tenor.
Myth 6: The loan has a high rate of interest
The interest rate over the loan against property depends on various factors like the lender you choose, your credit score, the value, the condition of your property, etc. By and large, these loans are secured, and so, they have an affordable rate of interest that you can repay over a lengthy tenor. Maintain a good credit score and pledge a high-value property to ensure that you get a reasonable interest rate.
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