Investing in residential or commercial properties is considered among the best investments that one can make. Besides providing you with regular rental income, it can also help you avail a substantial loan amount if required. A loan against property can be explained as a type of secured loan that banking and non-banking financial institutions offer against a residential or commercial property. The best thing about a loan against property is that the interest rate charged here is lower when compared to other loans, such as a personal loan or business loan.
Why Should You Go for a Loan Against Property?
There are numerous benefits of opting for a housing finance. Some most prominent ones are listed below:
1. Low-interest rates
A loan against your commercial or residential property is a secured loan, meaning banks have security that they can collect the amount even if you default on your repayments. It reduces the risk for the bank and, in turn, lowers the interest rates.
2. Free to use the property
This is one of the most underrated benefits of loans against properties. You can stay in your house even if you have a loan against it. It doesn’t cease your ownership during the loan tenure.
3. No restrictions on the use of funds
A loan against property provides you with the flexibility to use the funds as per your needs. It does not put any restrictions on how you can use the borrowed amount. You can use it for medical expenses, marriage, higher education, renovations, business, etc.
Eligibility Criteria for Loan Against Property
The loan against property eligibility criteria defines the prerequisites you need to have before you can opt for such a secured credit. Eligibility criteria might vary a little, depending on which lending institution you have selected. However, some mainstream loan against property eligibility criteria are mentioned below:
- As per the age criteria, the applicant’s age should be at least 21 years at the time of loan application, and the maximum age at the time of maturity of your loan should not be over 65 years.
- As per the employment criteria, the applicant can be either salaried or self-employed. Any employment works here since it’s a secured loan.
- You should own the property against which you will be getting your loan amount.
- In addition to the criteria mentioned above, some lenders evaluate your CIBIL score, which should be more than or equal to 750.
Documentation for loan against property
You need to provide some necessary documents, depending on your employment status, to get the loan amount. The documentation requirements are an important part of a loan against property eligibility. It includes address proof, identity proof, bank statements, salary slips, PAN card, property-related documents, etc. Some lending parties will also ask for other details, such as IT returns.
In a Nutshell
Loan against property is one of the best methods to borrow funds from banking and non-banking financial institutions. The lower interest rates and the flexibility on the use of funds make it a lucrative option if you own residential or commercial properties.