Know the Benefits While Taking Loan Against Property
Are you thinking of expanding your business? The first and foremost thing that comes to your mind is the arrangement of finance. There are various ways you can organize for funds, and one of them is by making provisions for an advance. You can take a personal debt, or you apply for loan against your property.
When an advance is given against the mortgage of property, it is treated as a LAP. The objective while taking a loan against property is providing finance to an individual who is in possession of a house property which is free from any sort of encumbrance.
• Signing a declaration
The debt may be taken against a residential or commercial property. You need to sign a statement that while taking loan against property the funds cannot be utilized for any illegal activity. Nor can it be used for any speculative purposes.
• Basis of calculation
The calculation of amount borrowed is done by working out a specific percentage of market value of asset.
• Threshold amount
Most of the lending institutions have a specific amount beyond which they do not cross. This is called the threshold value. The terms are stricter than home loans.
• Various needs
Apart from expansion of business, these kinds of debts are also taken for meeting the higher education expenses relating to the children, making payments for the son or daughter’s wedding expenses, meeting the medical bills.
• Eligibility conditions
The eligibility criteria will differ from one financial institution to another. Some of the common elements that the financial institutions look are the level of income, the related expenses and the external monetary obligations in the market.
• Cost of asset
The value of property mortgaged is another important factor that is taken into consideration.
• Examining your financial details
They look into your details regarding the payment of obligations such as credit card and prior debts if any.
Since your property is retained as collateral, it is considered as a secured loan. Let us discuss the various benefits associated with a loan.
• Reduced interest rate
Compared to a personal debt, the interest percentage of LAP is quite lower. The bank rate may range about 12% to 15% whereas in a personal loan the rates may be around 15% to 25%.
• Almost negligible prepayment penalties
You can always apply for closure of the loan by making prepayments for the loan. In case of these types of advances, hardly any charges are involved if prepaying is made.
• Easy availability
As these advances are secured in every aspect, the financial institutions are more than willing to give funds. So the process of obtaining funds by these means is simple.
Lower equated monthly installment
Always examine the tenure of the money borrowed. An inverse relationship exists between EMI and tenure. If the tenure is longer, the EMI will be lower. Generally, these are available for a long tenure. They may go up to fifteen years. It is always a wise decision to take an advance with short tenure to have a low rate of interest.