Loan Against Property: Myths vs Reality
A loan against property is a popular choice among individuals looking to arrange funds for urgent financial requirements. However, there are many rumours about this kind of loan. These rumours prevail because of lack of information about the loan product. This causes confusion and therefore, many stay away from availing of a loan against property, even when it is one of the safest ways to arrange money, especially in times of an emergency. This article busts popular myths about property loan so that individuals can apply for loan against property and take advantage of this financing option.
Myth: loan against property Interest Rates Are Higher than Other Loans
Reality: Financial institutions give secured and unsecured loans. For securing a loan against property, individuals must pledge a property. Lenders commonly levy a lower interest rate on secured loans because of the certainty of loan recovery. Compared with unsecured loans, loans against property can be availed of on a lower interest rate. If you have a clean loan repayment history, the interest rate offer on property loan can be even more attractive.
Myth: Property Loan Amount Cannot Give You Tax Benefits
Reality: It is possible to avail of tax benefits on property loan. However, the tax benefit that can be availed of depends on the usage of the loan money. If borrowers use property loan money for constructing a home or renovating a home or purchasing some property, they become eligible for tax deductions. These benefits are possible under Section 24(b) and Section 37(1).
Myth: Lenders Put Restriction on the Usage of Property Loan Money
Reality: No-end use restriction is a unique feature of the loan against property. Unlike a home loan, a loan against property allows borrowers to use the money as they deem fit. This is one of the reasons because of which property loan is often compared with personal loan. However, on personal loan, borrowers have to pay a much higher interest rate. On the contrary, property loans come with a cheaper interest rate. Because of the unrestricted usage, property loans come handy for managing even personal expenses.
Myth: Not All Types of Property Can Be Pledged for Availing of a Loan Against Property
Reality: For availing of a loan against property, individuals can pledge both commercial and residential properties. Lenders approve loan applications after evaluating the market value of the property. For securing a high-value loan, the property offered as collateral must be of high value. Generally, lenders can agree to offer a loan of up to 60% of the market value of the property.
Myth: The Owner of the Property Cannot Use the Property After Offering It as Collateral for Obtaining the Loan
Reality: A loan against property allows individuals to put their property to optimum use. Even after pledging the property to avail of a loan, the usage right remains with the property owner. If you have used a residential property to apply for loan against property, you can continue to occupy the property or even it rent out to earn income. Residential property can be used to run a business or as the owner of the property wishes to use the property.
What Is loan against property and How to Avail It?
A loan against property is a secured type of loan. As the name suggests, individuals can avail of a loan against the property they own using this financial product. Property loans come with flexible loan tenor and attractive interest rates. Since loan against property comes without any usage limitation, borrowers can utilize the funds for meeting various financial requirements. For managing the property loan, loan against property EMI calculator can be a handy tool. By using this free tool, you can decide a comfortable EMI and loan tenor and plan repayments.
Read Also: Common Mistakes to Avoid While Borrowing a Loan Against Property
