Loan against property is a type of secured loan offered by various financial institutions against mortgage of a residential or commercial property. Also known as a secured loan, loan against property can be availed for any purposes, be it for a wedding, business expansion or any other. You can also finance your education with a loan against property. The amount procured by the money lender is equal to the total estimated value of your property.
As these loans are secured, they are less risky for the lender. Also, the borrower can avail a substantial loan amount as high as 75% of the mortgaged property’s market value. Note that a mortgage is a transfer of interest of that property from the borrower to the lender against the loan amount. The lender reserves the right to liquidate the property if the borrower is unable to repay the loan amount in question. As such, lenders offer lower interest rates on secured loans.
Before availing a loan against property, the essential factor that the borrower has to keep in mind is the loan tenure. The loan repayment tenure for loans against property are flexible and long-term considering the high value amount sanctioned as the loan. However, it is advisable for an individual to compare the maximum loan tenure offered by various financial institutions and opt for the best deal.
There are factors to consider while availing a loan against property, and loan tenure is one such undeniable aspect. The loan tenure option offered to a borrower will depend on the following, viz. –
- Borrower’s Age – The borrower’s age, is an essential factor that all financial institutions are likely to consider. For example, if the borrower is less than 25 years of age, he is expected to avail the highest mortgage loan tenure. The maximum allowed repayment tenure is 30 years. But if the borrower is in his/her late 40s-50s, he will not be offered with such a long repayment tenure. Financial companies might demand a co-borrower, who has to be a legal heir of the property to be mortgaged to extend the tenure of the loan.
- The Rate of Interest – The interest rate is the next most important thing that a borrower needs to pay heed to. The interest amount is the sum that a borrower is liable to pay to the lender over and above the principal amount. For a loan against property, the loan tenure facilitated by the financial institutes is quite flexible and can be extended according to the convenience of the borrower.
More prolonged the loan repayment tenure lesser is the interest rate levied on the principal amount, in this way the borrower has to make lower EMI payments that are affordable and can be managed with daily expenses. The lender will consider the repayment capability of a borrower before providing a tenure range for the repayment. Applicants with the highest repayment capability will be able to avail the shortest tenures and thus save on the total interest payable.
- Purpose of Loan – NBFCs also introduced flexible mortgage loan tenure options with their Loans Against Property along with added features like no charge prepayment and foreclosure.
NBFCs also provides pre-approved offers on loan against property with zero processing time to help you from the long and cumbersome application process. These offers are applicable to several financial services and products like business loans, home loans, personal loans, etc. To know how this scheme would benefit you, you have to check your pre-approved offer by just entering your necessary details like name and contact number.
- Credit Score – Maintaining a good credit score is a virtue that every lending institution seeks from its borrower. Poor credit score defines a default credit managing capability of an individual, and thus makes the lender offer higher interest rates against a balanced loan tenure.
- Age of the Collateral Property – If the loan is borrowed by an individual for the purpose of buying a used apartment or residential property. The lender, in order to assess the age of the building, can hire an engineer to consider the property’s market value. If the individual assigned to gauge the property’s quality returns a negative feedback, the borrower may not be offered a long tenure and instead be required to pay higher EMIs.
As a borrower, it is important to consider these pointers before applying for a loan. Make sure you have all such factors which can stop you from availing multiple tenure options under check. Refer to leading lenders for the most beneficial loan terms and features.