Charges for a Loan Against Property explained

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 ROI 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 12% per annum (fixed or floating rate of Interest) for salaried individuals and self-employed professional enjoy an interest rate of 8% to 20% (fixed or 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

If all borrowers and co-borrowers are individuals, loan availed on floating interest rates, and loan taken for purposes other than business use, then there will be no foreclosure/ part-prepayment charges.

Part pre-payment charges

Much like foreclosure charges, if all borrowers and co-borrowers are individuals, loan availed on floating interest rates, and loan taken for purposes other than business use, then there will be no part pre-payment charges. However, apart from above situation part pre-payment charges are applicable for term Loan up to 4.72% (inclusive of applicable taxes) of the principal amount of loan prepaid on the date of such part-prepayment. Part pre-payment charges are not applicable for Flexi Term Loan (Flexi Dropline) and Hybrid Flexi.

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.