Finance Against Property: Eligibility, Documentation and Interest Rates in 2021
Finance against property is a tailored funding option that lets you have the benefit of your depreciating asset by providing a loan against its full value. Properties depreciate over time and it’s not wise to keep a property idle for no reason. If in any urgent need of cash, an idle sitting property can come quite useful.
There are many lenders including reputed NBFCs who provide financing against the value of the property at affordable interest rates.
What is the Maximum Value Anyone Could Get as a Property Loan?
You can use an online loan calculator tool to have an estimate of how much you can get out of your property. These online calculators are generally free and very easy to use.
What are the Criteria to Be Eligible for Obtaining Finance Against Property?
To obtain a loan against your property, you should fulfill certain requirements, which include:
- Nationality: Your nationality is utmost important in deciding whether you are eligible for loan or not. A citizen living in India with proper address proof and documents is more desirable to lenders than NRIs.
- Income: Lenders consider borrower’s income for profile assessment. This is important because your income decides if you can pay EMIs without delay or not.
- Nature of income: How you earn money is vital. Whether you are a businessman, a salaried person or self-employed, your nature of income has lot to do in deciding your eligibility.
- Credit score: If you are a first-time borrower, you may struggle a bit to obtain a loan. This is because lenders consider your credit score. An individual with no prior credit records generally has a poor credit score.An alternative to this is getting a bad credit loan.
- Type of property: Your property type has major role to play in deciding the loan amount. For example, a residential property in contrast to a corporate property can generate low loan amount. This is because, corporate properties have high value.
What are the Accumulated Benefits of Availing Finance Against Property?
Loans obtained on properties have many benefits. Like:
- Lower interest rate: When an individual seeks loan mortgaging their property, lenders charge lower interest rates. This is because of secured nature of the loan.
Furthermore, the chance of getting a loan at low-interest rate increases if the borrower has a good credit score and a better relationship with the lender.
- Quick documentation: In these kinds of finances, paperwork generally doesn’t take much time. Property papers are enough proof of one’s eligibility and need to be backed by identity, address. and income proofs.
A property with genuine documents is easy to verify and hence, allows lenders to complete paper works in no time.
- Easy loan repayment terms: Many financial institutions offer flexible loan repayment terms. Depending on the lender you choose, you can get a loan repayment period of up to 20 years.
- Possession of property: When a borrower mortgaged their property to the lender, they remain intact as the owners of such properties.
They retain the right to sell the property in case they are unable to repay the lender for any unforeseen reason.
- Prepayment of loan: Under certain conditions when lump sum financing is available, borrowers can easily close the loan account by prepaying all dues at once.
However, many lenders charge a preclosing amount. It’s advisable to enquire in advance about any such charges.
Calculation of Interest Rates
Borrowers find it very appealing when they get loans at affordable interest rates. There are some key points if followed, could help borrowers avail loans at affordable rates.
- If a borrower has a credit score of more than 700, they can expect a lower rate of interests.
- Age of property is also quite helpful in bringing down interest rates. Aging properties like houses and buildings often attract higher interest rates, while a piece of land ensures less interest rates.
- If a borrower is opting for a short period of loan repayment term with large sum, the rate of interest is quite high in such a case.
Also, if a borrower agrees to avail finance against property at a fixed rate of interest, the borrower will continue paying the same interest rate till the entire duration completes even if market interest has decreased by a huge difference. On the other hand, if the borrower is opting for a floating interest rate, they can save money if the interest rate has gone down. There’s a risk though. If the interest rate increases, the borrower will have to pay more amount, which is not the case in fixed interest rate options. One must thus apply prudence when availing the loan for the optimized management of finances.