loan against property

A loan against property provides a sizeable sum of money that can be easily utilized to cover any urgent demands. The no end-use restriction of a loan against property proves to be quite advantageous for borrowers, from education costs to company necessities.

You can obtain a high loan-to-value ratio of up to 90% of a property’s worth by using it as collateral. Additionally, there are reasonable interest rates and a long repayment period for loans.

However, a number of illusions surround the idea of a loan against property and must be dispelled in order to prevent borrowers from being misled by them.

5 myths about Loans Against Property

Borrowers cannot use the pledged property

It’s a common misconception that taking out a loan against property restricts how the property can be used. But this myth is totally false. Taking out a loan against property only gives the lender conditional ownership of the home so long as the whole loan amount is not paid back. Until and unless the borrower defaults, they are still the rightful owners of the property. As a result, you have total flexibility to utilize the property as you like.

LTV can go up to 100% of the market value of your property

The percentage of your property’s market value that a lender can finance through a property loan is known as the loan-to-value ratio or LTV. Borrowers frequently have the misunderstanding that they can obtain funds equal to 100% of the total market worth of their property.

One would be wrong to believe that, though. After considering a number of variables, such as resale value, property age, etc., lenders typically approve a loan amount of up to 75–90% of your home’s market worth.

High-interest rates

Property-based loans are a type of secured lending. Therefore, these loans claim of having significantly cheaper interest rates than other financing options like personal loans. Additionally, interest rates for loans against property vary between lenders and are established by examining a borrower’s credit history, CIBIL score, source of income, and property valuation. In actuality, credit score has a sizable impact on interest and eligibility for loans against property.

Only residential property can be mortgaged

This is primarily a mistaken assumption. By pledging residential or commercial assets, borrowers may obtain a loan against property. Some lenders permit securing a loan with the industrial property as well.

The loan amount is based on the purchase price of a property

Another common misperception is that determining the principle for a loan against property involves determining the property’s current market value. The market value of your property is determined by a number of criteria, including its location, age, geographical position, stability of the infrastructure, and more. A borrower’s ability to repay the loan and credit history will also play a role in determining how much money they can borrow.

Additionally, if you’re asking for a loan against property, be careful to review the pre-approved offers made by different financial institutions. These offers make credit approval quick and convenient and are offered on a variety of financial products like house loans, loans secured by property, etc. To check your pre-approved offer, please provide your name and phone number.

When applying for a loan against property, a borrower must avoid any such misunderstandings and make an informed choice by carefully weighing the advantages and disadvantages of various credit options. In order to facilitate loan processing, one must also review the paperwork required to apply for a loan against property.