Kavita Sriram, TNN
Are you in urgent need of money? Perhaps a loan against property can bail you out of crisis. This is a loan disbursed against the mortgage of your property.
Personal loans come with a high interest rate tag and short loan tenure. When you take a loan against property, it works to be cheaper than a personal loan. This is because the lender has a security in the form of mortgaged property, which does not exist in a personal loan.
With a long repayment period , usually 10 years, you can get a loan against your house. You may need the money for your child's education , marriage or other exigency. Like in the case of personal loans, the lender does not ask how you intend to spend the money.
Some banks extend the loan against property facility to residential as well as commercial properties, for loan amounts ranging from Rs 10 lakhs to Rs 3 crores (varies from lender to lender).
From funding existing business to debt consolidation , emergencies and education , these come as a big relief in times of need. Some banks even throw in freebies like free personal accident insurance cover.
To qualify for a loan against property, you must be above 21 years of age and less than 60 years, if salaried. The maximum age limit for self-employed individuals is 65 years. Salaried applicants are expected to be employed continuously for at least three years. The eligibility criteria are the same as that for a home loan.
Documents required include proof of identity (passport, driving license etc), proof of residence address (passport, electricity bill etc), and proof of age (birth certificate, school leaving certificate, passport etc).
Salaried individuals must submit their latest acknowledged IT returns or bank statements for the last three months. Self-employed individuals can submit computation of income for the last two years certified by a charted accountant.
Some lenders allow this loan to be taken as an overdraft . The advantage of taking a loan using the overdraft option is that you have to pay interest only on the money you withdraw, till the time you repay it.
Otherwise , if you seek a normal loan, you will have to pay the interest on the entire amount throughout the tenure of the loan.
When choosing a lender, there are other factors that you must consider like fees and penalties. Processing fees is the amount charged by banks to cover the cost of processing your loan. This amount varies from bank to bank. The fee is usually between 0.25 to two percent. Prepayment penalty is paid by the borrower for foreclosing the loan before the actual tenure.
This is levied as a percentage of the outstanding principal of the loan amount by some lenders. Understand these penalties, charges and fine prints before you select a lender.
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