There are many different types of loans available, such as home loans, small business loans, auto loans, and much more. But one of the most popular type of loans currently seems to be loan against property. In fact, by September 2018, the loan against property segment in India saw an increase of around 33%, as compared to 2017, according to data provided by TU CIBIL.
Here are some of the reasons why loan against property is such an attractive option for so many people.
One of the biggest benefits of mortgage loans is the much lower interest rate, compared to personal loans. This is generally between 15% and 25%. But in the case of loan against property, the loans are secured, which helps keep the interest rates between 12% to 15%.
Since loans against property are secured, banks believe that there is lower risk for them to lend the money. This allows them to provide a longer repayment schedule. The repayment tenure of a personal loan is generally up to just 7 years. However, in case of a loan against property, the tenure can be as long as 15 years.
There is an inverse relationship between the tenure and the EMI. If the interest rate is fixed, then the longer the tenure, the lower would be the EMI. And as stated earlier, in case of a loan against property, banks are willing to offer longer tenures. This makes a mortgage loan more affordable for people. However, it is advisable to go for as short a tenure as you can afford because although it is more convenient to have longer tenure, you would end up paying more due to the interest you will pay.
As most of the documentation is completed at the time of property purchase, the paperwork in case of a loan against property is generally very simple. All that is mostly needed is a clean title deed, without any encumbrances.
In case of loan against property, banks generally provide a loan that is around 60% to 70% of the property value. But in certain cases, this amount can even rise to 80% of the property value. This translates into quite a sizeable amount of funds. It would extremely difficult to get such large sums with a personal loan.
Apart from all this, another advantage of these loans is their flexibility. A mortgage loan can be taken on many different types of property. The loan can be taken on self-occupied as well as rented property.
To get a mortgage loan, a bank would generally ask for the following documents:
An accurately filled and signed application form.
Residence and identity proof. PAN card, voter ID card, Aadhar card, passport, or driver’s license can be used for this.
Proof of income, such as the salary slip for the last 2 months, the latest Form 16, and your bank statements for the past 3 months.
In case of businesses, audited ITR financials might also be required.
Putting up your property as collateral can prove to be risky. Therefore, it is advisable to do proper research before finalizing your decision.