Fees and Charges for Loan Against Property: Explained
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Fees and Charges for Loan Against Property: Explained

  • Highlights

  • The fixed interest rate ranges between 10-15%

  • Floating interest rate depends on market dynamics

  • One-time processing fee of 1-2% is charged

  • No foreclosure charges on floating rate

A loan against property is a popular mortgage tool which could be availed by both salaried individuals as well as self-employed to meet their personal or business needs. This is a secured financing option, which means that the individual is required to pledge a residential or commercial property as collateral for availing the loan.
The most important and foremost concern of borrowers revolve around the rate of interest charged and the associated fees and charges applicable. While some of these fees and charges are fixed, others vary as per the loan amount availed.

Interest rate

A loan against property has emerged to be the most attractive financial tool for individuals in search of funds owing to the competitive interest rates charged by the lenders. The rate charged is primarily dependent on the loan tenor and the borrowed amount.
Borrowers have the option to choose either a fixed or an adjustable rate of interest. As the name suggests, a fixed interest rate stays the same throughout the loan tenor. The adjusted rate varies as per the market setting.

The loan tenor differs from lender to lender but is generally observed to be within a range of 10-15%. However, Bajaj Finserv Loan Against Property comes at an interest rate of 9.50-11% for salaried individuals and self-employed professional enjoy an interest rate of 9.95-14% to borrowers opting for a fixed interest rate.
Some of the associated charges levied by lenders also include processing fees, loan statement charges, EMI bounce charges, etc. Let’s look at the details below:

Processing fee

Lenders levy a non-refundable one-time fee from the borrowers during submission of the loan application form. Typically, 1-2% of the loan amount is charged as processing fee.

Foreclosure charges

As per the 2014 RBI circular, individual borrowers are not required to pay any foreclosure charges in case of loans availed on floating interest rate. However, non-individuals borrowing on floating rate and all borrowers opting for a fixed rate of interest will have to pay foreclosure charges. Utilize this Loan Against Property Foreclosure Charge Calculator to gain a better understanding.

Part-payment charges

Similar to foreclosure charges, individuals borrowing at floating interest rate will not be liable to pay any part-payment charges. But, non-individuals opting for floating rate as well as the ones opting for a fixed interest rate will have to pay minimal charges to part-prepay the loan. For instance, Bajaj Finserv charges a 2% charge in both cases.

Statement charges

Lenders might levy certain charges for providing loan statement charges or even separate interest and principal statement charges over and above the interest.

EMI bounce charges

It might happen that the borrower defaults on his EMI payment either due to inefficient funds in their account or due to some problem with auto-debit instructions or post-dated cheques.
In such cases, the borrower will have to pay a bounce charge if the EMI is not paid within the grace period. You might have to also pay bounced cheque charges too in addition to this. This charge can go up to a maximum of 2% of the loan amount.

Conclusion

Remember the above list is not a comprehensive one, for full details on the fees and charges levied contact your preferred lender and also discuss the same with your financial adviser.

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