Property loan refers to a type of loan utilized to buy a building or a piece of land. If you have an immovable property in the form of your residence or any commercial building without any other liabilities, you can get a loan by keeping them as security. You can access a large sum of money at a minimum interest rate as your loan is guaranteed by your property. Your physical asset will be with the lender till you pay back the complete loan amount. The benefit of a loan against property is that it enables you to spend the money on various activities, business or personal. Nowadays it becomes convenient for borrowers to grab the best option in the market by comparing the different lenders with the help of a loan against property calculator. Let us discuss this further.
Benefits of loan against property
Competitive interest rate
Different lending organizations offer different interest rates for property loans, and you can choose one which suits your condition. Though the interest rate on a loan against property is low it is also influenced by your employment status. It starts from 7.25 percent per annum to 9.25 percent to 11.50 percent per annum depending on whether you are a salaried or self-employed individual. The interest rate is low because of the absence of risk.
You can procure a large sum of the amount with a property loan as it is backed by your already existing assets. According to the norm, the property loan covers 60 to 65 percent of the total market value of the collateral assets. As a borrower, you can get from 5 lakhs to 5 crores to 7 crores.
The eligibility criteria are made easy for borrowers of loans against property. You can quickly apply online and fulfill the eligibility criteria. Because of online documentation, there is faster approval and processing of the loan.
Transfer of money into your account in no time
Easy eligibility conditions, less paperwork, and the doorstep facility makes the loan application process smooth and secure. Nowadays lenders transfer the money within 72 hours. This loan helps you in emergency situations.
Long repayment duration
The repayment schedule of property loans is longer than other loans. It could be 15 years or up to the age, you will retire whichever suits your financial condition. You can plan your EMI schedule ahead for an extended period of time. With the loan against property calculator, you can calculate your EMI amount based on the loan you are applying for to get the real picture. This EMI combines both principal and interest amounts and it remains the same for the entire duration of the loan. The interest is lower with a longer repayment duration.
Prepayment and foreclosure of loan against property without any penalty
If your property loan is taken on a floating interest rate, not a fixed one you can opt for prepayment and foreclosure of the loan without paying any additional amount. Usually, most loan against property is approved on a floating interest rate to allow the borrowers to avail of this facility.
Eligibility conditions of property loan
The eligibility criteria for property loans are differently set for salaried individuals and self-employed ones.
- For salaried individuals, the average age criteria are from a minimum of 23 to a maximum of 62 years while for self-employed people it is from 25 to 70 years.
- If you are a salaried individual, you should be employed with any public, private or multinational corporation. While self-employed applicants must show proof of a steady flow of income from their business.
- The nationality and the property locations are the same for both types of applicants. They should be Indian citizens and their properties should be located in India only.
When it comes to documentation, the salaried applicants should produce their latest salary slips for 3 months, PAN card, Aadhar card, the document of the property that is to be kept as a mortgage, income returns, etc. Whereas the self-employed applicants must show their last 6 months’ bank statements, PAN card, Aadhar card, income tax return, or any other financial documents, documents of the mortgaged property.
One should remember that all these documents must be compulsorily submitted to the lenders. As the requirements of documents may slightly vary from lender to lender, so you might require submitting some extra documents in the loan approval process.
Concluding thoughts By taking a property loan you can apply for tax deductions under the Tax Benefits Act 24 (B). you can get as many as 2 lakhs of tax benefits if you utilize the fund to purchase new construction. It will be applicable to the interest paid on your loan amount. In simple words, the deduction will be applied to the monthly EMIs interest part. This hidden benefit of a loan against a property makes it all the more appealing to borrowers.