Loan Against Property: Myths vs Reality

FPJ Web DeskUpdated: Friday, July 29, 2022, 04:47 PM IST
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Misinformation or believing in unconfirmed rumours can often dissuade interested borrowers from availing of the right loan type that addresses their unmet financial expenses. The marketplace is full of half-baked opinions and self-proclaimed financial gurus whose misguidance can lead to monetary disasters. Considering the impact availing of a loan can have on your personal finances, borrowers are advised to thoroughly research the credit avenues available to them before committing to one.

Loans against property are a popular choice with individuals who require high-value funding urgently. It is a more cost-effective alternative to a personal loan that comes with a cap on the sanctioned amount and is comparatively more expensive, given that its interest rates are almost 3% to 4% higher than that of a loan against property. Property Loan borrowers can utilise the loan sum as they deem fit, including business expansion, ov`erseas education, wedding functions, medical emergencies, or even a once-in-a-lifetime travel plan.

However, applicants can get confused because of the myths about loans against property doing the rounds implying that the loan is not a safe funding option. Regardless of whether you will proceed with your loan against property application, you must clarify your understanding of the loan type before taking stock of your financial requirements and how well a loan against property can serve it.

Common Loan Against Property Myths Busted

Afraid of applying for a loan against property because of a common myth parading around as the truth? Before you dismiss loans against property, look at some myths we bust for maximum consumer information.

Myth 1: You cannot use or live in the property you have pledged.

Reality: This is a common misconception that leads potential applicants away from availing of the benefits of a loan against property. While it's true that the lender uses your property as collateral, you are well within your rights to continue using your property as you see fit – by occupying the property yourself or allow tenants to occupy it.

The only circumstance that can lead to your rights being revoked is if you continue to delay your EMI payments or default on your repayment schedule. The loan contract allows the lender to seize your property to make back the amount that is owed.

Myth 2: There are restrictions on how you use the loan sanction.

Reality: Just like a property loan, or a gold loan, your loan against property sanction comes with no end-use restrictions, making it a compelling funding option. Home loans or car loans have a predetermined purpose, and the funds released can only be used to address home or vehicle buying expenses. People, in turn, lean towards a personal loan to pay for expenses that fall outside this realm. However, a loan against property allows you to use the funds as you wish, without costing you as much as a personal loan, as the loan against property interest rates are more cost-sensitive and affordable. Be it to expand your business and support your growing operations or for a grand vacation with your loved ones, you no longer have to pay higher interest on a personal loan because a loan against property is handier.

Myth 3: You can only pledge a residential property as collateral.

Reality: One of its landmark features is its flexibility, and a loan against property scores extremely high on this aspect. There is no such rule that dictates that only residential properties can be offered as collateral. Lenders also accept commercial properties and even in warehouses (at their discretion), allowing you to use what you have to secure easy funding.

Consider a Loan Against Property to Finance Your Needs

If you are in the market for a loan without restrictions, opt for a secured loan, such as a loan against property for its unmatched benefits and cost feasibility. You don’t have to be a high-net-worth individual to qualify for it, and the loan can be tailored to suit your financial requirements and repayment capacity.

Don’t fall prey to unfounded myths and do your research before applying for a loan against property.

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