Loan against property is a process of opting for the loans by an individual by mortgaging the property and submitting the documents to the lender, and availing liquid cash in return for that. The borrower should also have the property with clear titles and with no partner or co-owner be involved in the property. The borrower should also have an average score of CIBIL ratings, such that the loan cannot be approved. The loan against the property can be taken or should be considered only when the individual needs required liquid cash to satisfy his/her needs like buying a new property, renovation of the property, expansion of the business, travel purpose, marriage purpose etc.
The funds borrowed under loan against property are not liable for the income tax deductions. Only in case of the amount invested for the purchase of the property can the borrower can avail tax benefit on the interest being paid to the lender. The borrower can avail immediate liquid cash from the lender, without any hesitation as the property is already being mortgaged by the borrower to the lender ,and hence there is a surety to the lender that they can recover the funds through the seal of assets of the mortgaged property and thus will not be left with under-recoveries. The borrower can avail of a loan up to 60-70% of the total property amount as liquid cash.
Reasons worth being considered for availing loan against the property:
· Avail liquid cash in hand:
The borrower can avail some liquid cash in hand by the mortgage of the property documents to the lender ,thus getting to utilize the funds taken from the lender, for the purchase of new property, marriage purpose, renovation, travel purpose. The liquid cash availed can better be utilized in case of shortage of funds or in emergency need of cash required for any of the purposes.
· Avail loans even against poor Cibil rating:
The borrower can avail of the loan in case of the mortgage of the property even while having a comparatively low cibil score as the borrower has already mortgaged the property with the lender, thus allowing the borrower to avail funds even in case of the low cibil score. The bank or a financial institution may not hesitate to extend loans even in case of low cibil score ,which otherwise, without the guarantor or mortgage of property, may not extend loans to the borrower.
· Avail of higher loans credit even in case of the low salary:
The applicant can expect higher credit even in case of the lower salary as the lender is having the property documents being mortgaged thus, if the borrower fails to repay the instalments, the lender can seal the assets of the borrower. Thus the higher amount of credibility the borrower can avail, helping the borrower enjoy the leverage of a higher amount of money for the personal expenses. The borrower needs to repay the installments on time, while as in the
case of the delay of the payment, the borrower can still be heavily penalized in spite of the borrower has mortgaged documents with the lender. The parameter scales for applying for the loan against the property are different from the loan applied against the regular income proof. As in this case of loan against property, the lender may easily consider extending loans up to 60-70% of the property value with a comparatively even higher moratorium provided.
· No ITR returns mandatory:
If the borrower does not has proof of filing income tax returns, then also the borrower can avail loans from the bank due to the mortgage of property with clear titles. In the case of the bank loan in regarding to the income proof, the borrower cannot avail of the loans without the income tax returns filing as the reserve bank of India guidelines. A Loan against the property is a secured loan without any much criteria loan is extended to the borrower, which only mandates the borrower to opt for a loan with proper submission of documents with clear titles. The interest rates typically charged are being the 10-15% range while opting for the loan against the property.
· The borrower can opt for a higher moratorium against higher interest rates:
The borrower can opt for longer duration loans being stretched against the mortgaged property as the borrower has already submitted property documents to the lender ,in case of the loans opted, giving surety about recovery. Thus the borrower can opt for the lower monthly installments with slightly higher interest rates. In case of delay of installment or missing installment the lender may charge a heavy penalty against the monthly installments being assigned to the borrower.
Hence it is always advisable that the borrower should opt for the loan against the property in case of the availability of the extra property to mortgage and thus avail some liquid cash in hand to buy new property or else opt for personal loans like travel loan, marriage loan, educational loan.etc While if there is a shortage of funds by an individual, then the borrower can opt for a loan against property as it enables quick access of funds to the borrower helping spend money for real estate or personal expense purposes.