Know All About Home Credit Personal Finance Or Loan Against Property

People often need money to meet their requirements for personal or business needs. This need, often, exceeds what one earns as a salary or business income. But they can take a loan to meet their requirements.
People avail loan with a specific end use in mind and lenders tend to customise their loan products. That way, a borrower can pick the more appropriate product to the customer, with varying features with respect to the duration, quantum and attached interest rate and so on.

Loan For Property And Loan Against Property

One can take a loan to buy a house and also take a loan against the house for some other purpose. In both the cases, the property is the collateral.

Loan For Property:

One can borrow money from lenders when they go about buying a property, both for under-construction, ready-to-move in houses or apartments and even land. The property being acquired is used as a security or mortgage against which the borrower gets the loan amount.

Loan Against Property:

It also works the other way round. People can also use the property they already own to borrow money. Of course, one cannot use the property that is already on a mortgage to get additional money via a loan against property. This is because in the first case the property already has a legal claim, which makes it ineligible for getting a loan, even though the property is under one’s name.
That said, a property owner who has either bought the property through own resources or has already paid back the money borrowed to buy the same property can use it as a collateral or security to borrow money.

Key Features Of Loan Against Property

• Loan against property can be taken both for personal use or by small entrepreneurs for their business needs.
• It can be both for personal and commercial property owned by the borrower.
• Such a loan is usually taken for medium to long periods.
• The rate of interest charged is a mark-up over the prevailing home loan rates.
• Property whose value is higher tends to get a relatively better, meaning lower, interest rate for the borrower.
• To ascertain the value of mortgage, lenders use professionals who look at the prevailing value of property in the vicinity and the minimum value for a property of a given size in the locality by municipal corporations.
• The amount of money one can borrow is less as the loan to value ratio—or the margin—is lower compared to what lenders use for financing a purchase of a property.
• While banks and non-bank lenders typically offer around 70% of the amount to buy a property, in the case of loan against property they are open to lending 50-60% of value of the property.
• Once the loan amount and interest rate dues are cleared one gets the property papers back.

For availing a loan against a property, the key documents are the original property ownership papers. In addition to other basic documents like identity and residence proof, one also needs to have the appointment letter (for salaried employees) and bank statements.

Reverse Mortgage

There is also a specialised loan against property product where those above 60 years old have an option of a reverse mortgage. In this, the property owner can mortgage the asset while living in it and does not even have to pay back.
Essentially, this works like a monetisation of the property without having to vacate it. One can claim back the rights of the property by paying back what they availed as a loan plus the interest rate.

Conclusion

A loan against property is a secured loan that can be taken to borrow a large sum for meeting medium to long-term personal or business needs. For availing such a loan from reputable lenders like IIFL Finance, all one has to do is to be in a possession of a personal or commercial property that is free of any liabilities.