Loan against property is a type of loan in which you receive funds in return for providing your commercial or residential property as a mortgage. Many individuals and businesses use this method of finance as it allows funds equivalent to a certain percentage of the property’s value, and its interest rates are more competitive than unsecured loans.
As an individual, you can get a loan against property to address essential life goals such as paying for the higher education of your children, marriage, or making a down payment for a home or vehicle. As a business handler, you can use it to avail funds for expansion and R&D for novel product development and its marketing and promotion. You can even avail of a loan against property to bridge gaps in pre-existing cash flow and fund new requirements.
Generally, this loan is given against either residential or commercial properties. Whatever your purpose is, loan against property can be beneficial in many ways. Here are some of these benefits:
- Competitive interest rates: As these loans have a secure mode of funding, the interest rates are quite low as compared to other loans. This results in a little payback amount and, consequently, lower EMIs. The borrower can easily tend to their different financial needs without having to worry about higher interest rates.
- Long Repayment Tenure: As a loan against property provides quite a long time for repayment, the EMIs come down to an easily payable amount. One can pay smaller chunks of the amount each month without worrying about other expenses.
- Continuous Ownership of the Property: A property is something that can not only avail you the ownership benefits on selling, but it can also be used as a valuable exchange in such cases. You can keep the full ownership of your property and still unlock the dormant financial potential of your asset. Just make sure you don’t fix a default EMI as it might lead to some legal issues in the future.
- Eligibility for Loan Against Property: There is a little difference in Loan Against Property eligibility for businesses and individuals. For salaried individuals, lenders generally state a guaranteed annual income below which they don’t approve the loan application. Apart from that, there is a minimum and maximum age criterion for lending.
- Provision of Proof: Businesses also need to provide proof of an inevitable turnover for taking a Loan Against Property. Nowadays, most lenders state the eligibility norms on their respective websites.
Documents required for Loan Against Property:
The type and number of documents needed for each lender are different. However, here are some standard documents you’ll need to produce if you want to avail of a loan against property in India.
As an individual:
- Income tax returns
- Salary slips, or Form 16 from the employer
- Bank statement of the previous few months
As a business:
- Audited ITR financials
- Bank statements of the primary account
- Certificate of incorporation for companies
Shareholding patterns in case of private/public limited company
Along with these documents, one needs to attach a photocopy of:
- PAN card
- Identity and address proof
- Business continuity proof
- Passport-size photographs
Every lender has this list mentioned on their website.
Thus, a Loan Against Property can serve a range of personal and business needs with a lot of benefits.