A property loan means loans against property, (LAP). You get this loan by keeping a property as a mortgage with the bank. The loan offered is a specific percentage of the property’s value in the market. Banks normally offer 60% of the value of the property as a loan. This loan is considered as security as a specific property has been kept as collateral with a bank. The lender has all the rights to auction the property for the recovery of the money in case you are unable to repay the loan. Self-employed people and those from the salary class can apply for this loan.
Factors Determining Eligibility
The factors determining the eligibility for this loan with most financial institutions and banks are:
- Valuation of Property
- Minimum age needs to be 21 years.
- Work experience
- Present Liabilities
- Number of Dependents
- Financial Documents
What Can a Property Loan Be Taken?
A property loan taken can be used for many reasons. You can think of getting your daughter or son married, expanding your business, funding your vacation or medical treatments and even spending on the higher education of your kids.
Some Benefits of Property Loans
Opting for this property loan, you can look forward to multiple benefits offered:
- Negligible prepayment charges: Financial institutions and banks normally do not charge any prepayment charges with this type of a loan. This helps you to close the loan.
- Low interest rates: As compared to personal loans, these property loans have lower interest rates as the financial institution has got you property as collateral.
- Tenure: These types of loans are available for longer period of time, might be even for a period of 15 years.
- Easier to get: Banks are always willing to give these loans without much of a hassle, as these loans are secure.
- Low EMI:These loans can be repaid easily as the EMI is not as high due to their long tenure. Though a long tenure is comfortable but it is advised to opt for a short one as the interest burden is eliminated.
- Processed Quickly: The procession time taken for these loans is much shorter as compared to the other types of loans.
Knowing and understanding the differences between property loan and personal loan can help you to make the right choice, one which is suitable for your requirement.
- a) The property loan is taken by mortgaging a property while a personal loan can be taken for personal use without any guarantor or security.
- b) This property loan works out a comfortable option as this is considered as one of the cheapest loans available, talking about personal loans, you need to be aware that these loans attract the highest interest rates.
- c) The loan eligibility is determined by the income and the value of the property in property loans, while the individual’s income determines the maximum loan eligibility in personal loans.
- d) The maximum loan tenure in property loans is almost 15 years, while in personal loans this works out to be 5 years only.
- e) EMIs in property loans work out smaller as the rate of interests are low, this is not so with personal loans where you land up paying higher EMIs.
Information on Property Loans
Once your property loan has been approved it takes 7 to 10 days to process by a bank. This is totally dependent on the documentation and profile. You need to make sure that the property is insured against floods, fire, earthquakes and other hazards. The repayment by an individual can be done either by the ECS (Electronic clearance system) or PDC (Postdates Checks).