Loans against property, more popularly known as property loans, are loans availed of against the mortgage of a residential or commercial property. Banks and non-banking financial companies offer loans against property in India. In the case of these types of loans, the residential or commercial property against which the loan has been taken serves as collateral or security for the loan. Loans against property come with a flexible repayment tenor. Depending on the lender's policies, a borrower can get anywhere between 15 to 20 years to repay their property loan. Further, one can get up to 70% of a property's value as a loan. Loans against property are an excellent financing tool for borrowers who want to raise a substantial amount of money. However, one must avail of these loans after careful planning as the inability to repay the loan money can lead to one's property getting confiscated and their lender selling it for loan recovery. A loan against property EMI calculator can prove helpful for borrowers -- it can tell them the loan amount they can easily borrow and repay as well as the EMIs they can comfortably afford.
A loan against property allows borrowers to leverage the value locked in their property. It is also an entirely safe way of arranging money when opted for after careful planning. Let us now look at how borrowers can use a loan against property to achieve their dreams.
How Can Use a Loan Against Property to Achieve Your Dreams
1. You Can Use the Loan Money to Take Care of Your Responsibilities
One of the biggest benefits of a loan against property is that the money comes with zero end-use restrictions. Borrowers can use the loan money to fulfill all of their responsibilities, such as funding a child's education or wedding or taking care of an ailing parent or spouse.
2. You Can Use the Loan Money for Investment Purposes
Since loans against property funds come with no end-use restrictions, borrowers can use the loan money to buy another house or invest in their retirement planning. Borrowers must however keep in mind that if they are investing for better returns, they must invest their money after proper research and after taking advise from an expert.
3. One Can Use the Money to Start a New Business
After retirement, most people do not like sitting at home. However, starting something new requires a lot of money. Borrowers can easily take a loan against their property and use the loan money to start a new business.
4. Senior Citizens Can Use this Loan Option to Arrange a Regular Income after Retirement
Reverse Mortgage is a special type of mortgage available only to senior citizens in India. When senior citizens use this option, they take a loan against their property. Most lenders sanction up to 60% of a property's value as a reverse mortgage. One can expect to easily get up to 50% of their property's value as a loan under the reverse mortgage. The senior citizen is not required to repay the loan money. After their demise, the lender sells the property and keeps the loan money they had sanctioned along with the interest chargeable on the loan amount and returns the remaining amount to the heirs of the property.
5. You Can Create a Source of Income by Opting for Loan Against Rent Receivables
You can also take a loan against the rent income you will receive from your property in the future. When you opt for a loan against rent receivables, you get anywhere between 50% to 85% of your future rental income as a loan. Lenders generally charge a slightly higher rate of interest in the case of loans against rent receivables. One can expect to pay anywhere between 11% and 14% as interest in the case of these loans.
Now that we have some idea of how borrowers can use a loan against property to fulfill their dreams or create a regular source of income, let us look at why borrowers must opt for a loan against property to take care of their various needs.
Benefits of a Loan Against Property
1. Low-Interest Rates
Loans against property are secured in nature. They are backed by collateral and therefore, lenders charge a nominal rate or interest on these loans. The low-interest rates applicable to these loans make repaying these loans simple and stress-free.
2. Long Repayment Tenor
Loans against property come with a long repayment tenor. In general, most lenders allow borrowers to repay their loan over a period extending up to 20 years. The long and flexible repayment tenor involved also makes loan repayment easy.
3. Sizeable Loan Sanction
A loan against property is one of the few loan options that give borrowers access to a sizeable loan amount. Under property loans, borrowers can get up to 60% of their property's value as a loan, provided they meet all the eligibility criteria.
4. Zero End-Use Restrictions
The loan money comes with zero end-use restrictions. Borrowers can use the money to meet any kind of need.
5. You Can Avail of a Top-Up Loan on Your Property Loan
Borrowers can also avail of a top-up loan on their loan against property. The top-up loan comes with zero end-use restrictions and attracts a nominal rate of interest. Further, the loan tenor is also flexible and long for these top-up loans.
Final Words
Loans against property are an excellent and secure way of raising money. However, since these loans involve collateral, one must avail of these loans after careful planning. Further, they must only borrow what they can easily repay.
