A ‘loan against property’ is a personal loan given against the mortgage of one’s property. This loan is provided at a certain percentage of the value of one’s property, generally between 40 to 60 percent of the property value. These loans are most usually taken against residential properties (house/flat/property) which could be self-occupied or rented out.
Loans taken against properties are usually personal loans which can be taken to expand ones business, to provide funds for events such as marriages, further education fees, funding a vacation or funding medical treatments. The eligibility criteria for a loan against property is similar to that of normal loans in the sense that the lender will check your income, savings, debt obligations, the cost of your property, your credit score and your repayment track record. Interest rates for Loans against property range from 12% to 15.75%.
These loans are secured loans as the repayment of the loan is guaranteed and the maximum loan tenure for loans against property is 15 years. These loans are usually preferred over personal retail loans which charge an interest rate of 16% to 21%. Personal loans are also unsecured loans and the eligibility of the loan is determined by the applicant’s income level. Personal loans also have a lesser tenure at just 5 years making loans against property a more feasible option often.
Loans against property are useful when you need to acquire funds with a low interest rate and a long tenure to repay. These loans are quickly stealing the limelight from personal loans due to the many advantages and the flexibility that it offers.