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7 Key Things To Know About A Loan Against Property

  • Highlights

  • Get hefty sanctions with a loan against property

  • Pledge a residential/commercial property as security

  • Use an loan against property to fund a multitude of personal & business needs

  • Access the loan in parts when required as a Flexi Loan

Whether you need a large amount of finance to scale up your MSME, consolidate debt, throw a lavish wedding reception or foot costly medical bills, a mortgage loan is the ideal funding option. A loan against property is a secured loan, meaning that, in order to gain finances from a lender you need to pledge a residential or commercial property as security.

Data from a credit bureau show that loans against property were the fastest growing lending option in the country and grew at a 33% rate in 2018. In fact, loans to MSMEs alone have grown from 7.06 lakh crore to 12.60 lakh crore from 2014 to 2018. Loans against property are, in many cases, the preferred borrowing choice because of the huge amount of financial assistance you can avail, and the relatively economical repayment options you have. However, to make the most of this form of credit, you should learn about its salient features. Here are the 7 key things you must know about a loan against property.

The Loan Amount You Can Avail

The amount you can borrow through a loan against property directly depends on your property’s worth. Lenders evaluate your property and offer a percentage of its market value as loan. Generally, you can obtain a loan running up to 80% of your property’s market value. This percentage is called the loan-to-value-ratio.

So, if your property is worth Rs.2 crore and the LTV ratio is 50%, then you can avail of a loan up to Rs.1 crore. To get the best value for your property choose your lender wisely. Currently, Bajaj Finserv lends amounts as high as Rs.5 crore through the Bajaj Finserv Loan Against Property.

The Different Kinds Of Properties You Can Pledge As Security

To get a loan against property, you can pledge any residential or commercial space you own as collateral. The property may be self-occupied, can be on rent, or may be an idle asset. Some lenders also allow you to take a loan against land. A loan against plot is normally taken to buy land on which you can construct your house.

One thing to know about an loan against property is that if you fail to repay, you put your asset in a state of risk. That is, at worst, you can lose your rights over it. That’s why it’s crucial that you know what a loan against property is before applying for it.

The Different Purposes You Can Take A Loan Against Property For

You can use the finances obtained via an loan against property for any purpose whatsoever. Since a loan against property is a high-value sanction, you can use it to fund hefty expenses. Here are a few:

  • Business expansion

  • Family wedding

  • Debt consolidation

  • Medical treatment

  • Overseas education

  • International vacation

The Eligibility Criteria Applicable On The Loan

Loan against property eligibility criteria generally enlists terms related to your income status, age, and property. For example, here are some of the eligibility criteria you need to meet for a Bajaj Finserv Loan Against Property.

  • Income: You should be a salaried employee in a private company, MNC, or the public sector. In case you are self-employed then you need to have a regular source of income.

  • Age: 33 to 58 years if you are salaried, and 25 to 70 years if you are self-employed.

  • Property: The asset needs to be free of any litigation and insured against fire and other calamities during the loan tenor.

The Importance Of Your Debt-To-Income Ratio And Credit Score

When evaluating your loan against property application, lenders do not just consider your income, but your existing debt-to-income ratio as well. This ratio tells lenders what portion of your monthly income is already being set aside to service debts like car loans and personal loans. Try to keep this ratio below the 40% mark to gain a loan comfortably. Similarly, lenders check your credit score before giving the loan as this score defines your creditworthiness. Aim to keep your credit score at 750 or more to enjoy a hassle-free sanction.

The Documents Required To Support Your loan against property Application

In order to prove your eligibility, you will need to furnish the necessary loan against property documents. Here are some of them:

  • Salary slips

  • Bank account statements

  • ITR

  • PAN card/ Aadhaar Card

  • Property

An absence of these documents will make it hard for you to secure a loan. For example, in order to get a loan against property without income proof you may need to add a co-applicant and lower the LTV ratio.

Also Read: 4 Factors that affect the Interest Rate for Loan Against Property

Features and Benefits of Loan Against Property

The Main Benefits Of Taking A Loan Against Property

Being secured by a high-value asset, a loan against property gives you a range of impressive benefits. Here are some of them.

  • Lower interest rates: Loan against property interest rates tend to be around 3% less than personal loan interest rates. This is because the presence of the security lowers lending risks.

  • Longer tenors: Since it is asset-backed, you get to repay the loan over lengthy tenors. For instance, you can repay Bajaj Finserv’s Loan against property over a tenor of up to 20 years.

  • Smaller EMIs: Since interest rates are lower and tenor can be stretched long, you end up paying smaller monthly instalments.

Another way by which you can make your EMIs more affordable is by opting for the Flexi Loan feature on Bajaj Finserv’s Loan Against Property. Here, you can borrow from your sanction in parts, multiple times. Also you do not have to pay interest on the entire sanction, but only on the amount you utilise. Further, you can pay interest-only EMIs during the tenor and the principal only at the end. This feature makes the loan one of the most unique loans against property in India. To gain a hassle-free loan against property disbursal, check you pre-approved loan offer from Bajaj Finserv. Doing so gives you instant approval and access to customised financing.

 
 
 

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