A loan against property is a popular mortgage tool that both salaried and self-employed individuals could avail to meet their personal or business needs. This is a secured financing option, which means an individual is required to pledge a residential or commercial property as collateral for availing of the loan.
However, the leading concern of borrowers revolves around the rate of interest charged and the associated charges applied. While some of these charges are fixed, others vary based on the loan amount availed.
Interest Rate
A loan against property has become the most attractive financial tool for individuals searching for funds owing to the competitive interest rates charged by lenders. The rate charged is primarily dependent on the loan tenor and the borrowed amount.
Borrowers have the option to choose between a fixed or an adjustable rate of interest. As the name suggests, a fixed interest rate stays the same throughout the loan tenor, while 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% to 14% per annum (Floating rate of Interest) for salaried individuals and self-employed professional enjoy an interest rate of 9% to 14% per annum (Floating rate of Interest) 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 the submission of the loan application form. Typically, 7%* of the loan amount is charged as processing fees.
Additional Read: How is a Loan Against Property processed?
Foreclosure Charges
As per ana RBI circular, individual borrowers are not required to pay any foreclosure charges in case of loans availed on floating interest rates. However, others borrowing at a floating rate and all borrowers opting for a fixed interest rates are liable to pay foreclosure charges. Use the loan against property foreclosure charge calculator.
Part-Payment Charges
Much like foreclosure charges, individuals borrowing at a floating interest rate will not be liable to pay any part-payment charges. That said, non-individuals opting for floating rates and those opting for fixed interest rates 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 fees or even separate interest and principal statement charges, over and above the interest.
EMI Bounce Charges
The borrower might default on his EMI payment due to insufficient funds in his account or some problem with auto-debit instructions or post-dated cheques.
Additional Read: List of documents needed to apply for a Loan Against Property
In such cases, the borrower will have to pay a bounce charge if the EMI is not paid within the grace period. Apart from this, borrowers might also have to pay bounced cheque charges. This charge can go up to a maximum of 2% of the loan amount.
Conclusion
Remember the above list is not comprehensive; for full details on the charges levied, contact your preferred lender, and discuss the same with your financial adviser.
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