Loans against properties involve keeping an asset as security with a bank or NBFC for availing financing. Hence, a loan against property is a secured loan, and in case borrowers are unable to repay their loan, the lender reserves the right to confiscate the property.
Therefore, before opting for such a loan, it is imperative that borrowers understand the gravity of the situation that they are facing. If the situation doesn’t direct at a financial emergency requiring substantial funding, then borrowers can also consider going for other alternatives like personal loans.
Such financing alternatives can be used for short-term funding requirements. Due to their brief tenure, such loans have a higher rate of interest, therefore opt for Loan Against Property. Further, the amounts granted as loans for such a short tenure, are lower as well.
In case a borrower requires a higher amount of a loan, for a more extended period, then he/she can consider going for a loan against property.
Few situations in which a Loan Against Property is a viable alternative include:
> Business Expansion
Businesses that have ample vintage and a steady cash flow can consider a loan against the property to fund their expansion plans. Their regular income is secured enough to ensure timely repayments of EMIs. The Loan Against Property Interest Rates is quite lower in comparison to other loan facilities available.
However, businesses that are entirely new must not consider this financing avenue for expansion, since they still might not have the funds for ensuring timely repayments.
> Personal Purposes like Higher Education
Such objectives are long-term that require a considerable amount of funds. Usually, people put aside a certain amount of savings to back such goals. However, other than utilizing all the savings, one can always opt for a loan against property.
> Buying a New House
In cases where applicants are going for a new high-value property, the price of it will also be substantial. Herein, a loan against property is a much viable alternative than any other financing options.
- Lower Interest Rates.
- Higher amount granted for a loan against property India.
Before a borrower finally decides to take the plunge for such a loan, there are a few significant considerations that he/she must think of. In other words, prospects must be sure of their loan against property eligibility.
How must an Individual ensure his/her Eligibility?
- Is the individual in a situation where he/she can risk losing the property if faced with a failure to repay the principal amount at the end of the tenure?
- How safe are his/her Fixed Obligations to Income Ratio? Does the present income cover his/her obligations adequately? Can the remaining income fund EMI repayments.
- For how long will he/she be able to continue repaying the loan against property? In cases where borrowers feel that their incomes are enough to repay the loan before the tenure ends, they can always opt for foreclosing it.
- What is his credit rating? In case a borrower has a lower CIBIL score, financing institutions might be reluctant to grant a loan against property. Therefore, borrowers must repay all their existing obligations. Loans against properties can also be used for consolidating debts. Thus, such a loan against property can also be used to improve one’s CIBIL score.
After having an assurance of his/her credibility, and ensuring that the Loan Against Property documents required are in order, borrowers can always approach leading financial institutions.
Apart from benefits like flexibility in tenure, easy balance transfer, and a flexi-hybrid feature, such institutions also provide pre-approved offers. These pre-approved offers further simplify the processing of loan against property applications, thereby, reducing time consumption. These offers are also available for personal loan, business loan and various other EMI financing on finance products, etc.