Financial crisis can hit anyone hit any time, and when it does, it becomes difficult for one to cope with it without getting flustered. Even if you do think about taking a loan, you may feel that you are putting an additional financial burden on your shoulders.
However, this does not need to be the case, with a little bit of rational thinking and armed with research about the loan options that are available to you it is effortless to get over this financial slump and come out of it both mentally as well as financially healed. One choice when it comes to taking a loan to get over an immediate financial crisis is a Loan Against Property.
Advantages of Loan Against Property
- It helps monetize an asset (property) that otherwise remains idle.
- This loan can be taken against property that is self-occupied or that you have leased out.
- You can get a more significant amount on loan as compared to a Personal Loan.
- You can take the loan for a more extended period.
Although it is highly beneficial to opt for a Loan Against Property when in need of money, you need to keep in mind these five crucial points before going ahead with the credit.
Be realistic about the loan that you are taking
A Loan Against Property is something that you have to think about very seriously. From the minute the loan is approved, and you receive the money the loan provider keeps your property as collateral. If you are not able to pay back the loan in time, you run the risk of losing the said property to the loan provider. The loan providers also keep the property papers with them till you repay the entire loan amount along with the interest and the additional charges to the bank. If you have a steady income and know that you will be able to pay back the loan without defaulting or falling back on payments, you can Apply for a Loan Against Property.
There are no tax benefits for a Loan Against Property
Unlike a Home Loan, a credit against property does not entitle you to any tax benefits. Most people considering this option are not aware of the fact and think they can get the tax benefits because of its similarities to a Home Loan. If you were also one of those people, who believed that you should take this borrowing for the tax benefits it is best if you reconsider.
The longer you take to pay back the loan the more interest you would be paying
Although a credit against property allows you the benefit of taking a little longer to pay back your loan, you should remember that longer the tenure of the loan, the more interest you would be paying. This means that this kind of credit could end up being costlier than some other options in the market. It is essential that you look for the best Loan Against Property offers before you apply for one.
Always read the fine print
All lenders have their own set of terms and conditions. You should first go through all the documents to familiarise yourself with the rules and then move ahead with the other steps of the process. This is especially true in cases where you would be putting valuable property and assets as collateral. You must read between the lines and understand all the terms. You can also call the bank or loan provider and ask them to clarify any doubts that you would have before going ahead with the loan application. Going to an expert can help you understand any loopholes that may be present in the terms and conditions that you can use for your benefit.
Compare loan-to-value (LTV) ratios
To find the best Loan Against Property offer, you would have to compare the amount of loan that is being offered to the actual value of the property. Many banks and other financial institutions offer a loan of about 50-90% of the value of the property (also known as LTV). The LTV for a commercial property is always lower than for residential property. This is because most institutes believe that you are more inclined towards saving your home from foreclosure as compared to commercial property. This fact reduces the risk that the bank is taking while giving you the loan.
Once you are aware of all of these points and you, have found a loan provider that is best suited to you. You can go ahead with your loan procedures and use the money for things that you need.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
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