A loan against property is a process of mortgaging the property documents to the bank for availing some liquid cash in hand. The loans can be taken for the amount of a maximum of Rs.1 crores in case of a loan against property. The loan against property can be taken for a maximum tenure of 15 years. And the borrower can continue to do the usage of the property even after mortgaging the property to the bank. The bank charges a penalty on the non-repayment of the dues. Also, the CIBIL score gets affected in case of the delay or default of loans. Thus the borrower should be particular about the repayment of the loans. The banks also have the authority to seal the assets of the borrower in case of continuous default. The bank provides 1 month’s notice after the 90 days of continuous default and after that, the bank seals the property after a total of 120 days. Also, the borrower’s name is mentioned in the default history of the credit score in case of defaulting the loans. And thus after default, the borrower cannot get any loans from any of the lenders in the future. So thus the borrower should take care that the loans should be taken in an appropriate amount and also should be repaid on time to avoid getting blacklisted from all the lenders.
The bank provides loans up to 75% of the property value as loans to the borrowers. The borrowers are also charged with some processing fees for the processing of the loan against property. The loan against property is better than the gold loans or personal loans as the loans can be availed of the higher amount in case of the loan against property than the gold loans and also loans can be availed at lower interest rates than the personal loans. For the disbursement in case of the Loan against property no CIBIL verification is given any of the importance and also loans are approved without the income proof as there is surety amongst the lenders that the loan recovery can be easily done in case of loan against property. Thus the terms & conditions are very liberal in the case of the loan against property. A loan against property is thus a better option to avail liquid cash in hand and also can be used for any purpose. The bank does not ask for any kind of proof in case of the expenditure.
Common doubts related to the loan against property
Qs1: What are the documents required for the loan against property?
Ans: Following are the documents for the loan against property:
- Property documents with clear titles are necessary for the loan approval.
- Identity proof like pan card, Aadhar card, passport, driving license. etc.
- Employment proof.
- Income proof.
- In the case of self-employed businesses, registration proof is required.
Qs2: In what case application for a loan against property is rejected?
Ans: The loans can be rejected in the following cases
- Due to improper documentation of the property and the property is with un-clear titles.
- Due to the presence of a co-owner in the property the loan can be rejected.
- Loans can be rejected due to the property being a slum one or else an illegal encroachment or else is a dilapidated building.
- Loans can also be rejected in case of the borrower has already defaulted in any of the loans which the data can be recovered with the help and credit history.
- Also in case of no employment or income proof bank may sometimes reject loans as the bank does not wish to turn the loan into bad debt.
Qs3: How is an estimate of the loan amount is taken in case of the loan against property?
Ans: The estimate of the current market rate of the locality is taken into consideration along with the consideration of the condition of the building. The total super-built-up area and carpet area are taken into consideration and accordingly the valuation of the property is estimated. And then out of the total value, 75% of the property value is taken into consideration for the approval of the loans. The 75% is the maximum value while the loans can be taken of even lesser value as well.
Qs4: What are the basic rules to be followed after taking a loan against property?
The basic rules are as follows:
- The borrower should pay the installments on time to avoid getting penalized by the lender.
- The borrower can continue the usage of the property even after mortgaging the property as only documents need to be submitted by the borrower.
- The borrower can even pre-pay the loans if the bank does not charge a penalty on pre-payment. Also in that case the borrower can avail rebate on loans and save money on pre-payment.
- The borrower should read the loan agreement carefully and understand the terms & conditions of the loan.
- The borrower should fill up the settlement form after the repayment of the loans and can take the property documents back after the repayment of the loans along with the interest.
A few of the doubts of the borrower have been cleared in the above article. While mortgaging in case of the loan against property the borrower should be careful about the repayment as in case of the default the borrower may lose the property and also the borrower can be blacklisted from availing of the future credits, as the data of the default is updated in the CIBIL credit history. In case of the timely payment of the loans the borrower CIBIL score is updated to better ones.