Leverage Your Asset: How a Loan Against Property Can Fulfil Your Financial Needs
Loans against property are also known as property loans and are becoming quite popular in India. These are a type of secured loans that borrowers avail of against a collateral. This collateral is a residential or commercial property or a piece of land that the home loan borrower owns and is legally allowed to pledge as collateral. Before we get into the details of how a loan against property can help borrowers fulfil their financial needs, let us consider why loans against property are gaining so much popularity within the country.
Loans Against Property: Benefits
1. Low-Interest Rates
One of the many reasons why loans against property have become so popular is that they are sanctioned at a low rate of interest. Loans against property are backed by collateral, and the lender has the right to sell the property for loan recovery. Thus, the risk involved for the lender in the case of loans against property is quite minimal. Therefore, lenders sanction these loans at low interest rates on property, which eases the burden of loan repayment.
2. Long Repayment Tenor
A loan against property is one of the few loan options that comes with a long repayment tenor. Home loan borrowers can repay their loan over a period extending between 15 and 20 years. Such a long repayment period makes repaying the loan easy.
3. High Loan Sanction
Under a loan against property, lenders sanction 50% to 60% of the pledged asset’s net value as loan. If you are pledging a property worth Rs.1 Crore as collateral, you will be eligible for a loan sanction of up to Rs.60 Lakh. Other than a home loan, no other loan option gives borrowers access to such a hefty loan amount.
4. Zero End-Use Restrictions
Loans against property funds come with zero end-use restrictions. You can use the money for whatever purpose you deem fit. Your lender only demands that you pay loan EMIs on time and as long as you do that, you have full freedom to spend the loan money as you like.
Leverage the Value Locked in Your Property
Some loan-against-property borrowers think that if they pledge property as collateral, they will no longer be able to use it. This is not the case. If you are pledging a residential property as collateral, you can continue to inhabit it
Similarly, if you are planning to pledge a commercial property as collateral, you can continue to rent it out and earn income from it. All a loan against property does is leverage the value locked in the borrower’s property. So, a borrower can continue to use their property and avail of a loan against it too.interest rates on property
Here’s How a Loan Against Property Can Help You Achieve Financial Freedom
Loans against property funds come with zero end-use restrictions. Thus, a borrower can use the money as they please. Let us look at some ways in which a loan against property can help a borrower achieve financial freedom.
- A borrower can use the loan money to start a new business. A loan against property can help people in their late 50s and early 60s who have retired or are about to retire achieve financial freedom. After working all their life, people gather enough experience to start something of their own. They have ideas but often not enough money to give wings to these ideas. A loan against property gives borrowers enough money to start a business of their own. Thus, it helps individuals, especially those who have retired, give wings to their ideas.
- People who own property can also take a loan against it to fund the education of their children. Children are our future and investing in their education allows us to build a good future for ourselves.
- You can use the loan against property funds to invest for better returns. Since loans against property funds come with zero end-use restrictions, borrowers can use the money however they like. They can use it to invest for better returns. Borrowers can also use the loan money to buy another property, they can use the money to invest in the share market. Loan against property borrowers can also use the loan money to invest in different avenues and take care of their retirement planning.
- Business owners who own property can pledge their property as security and avail of a loan against it and use the money to buy machinery, invest in marketing and advertising, and basically any avenue that is sure to bring good returns in the future.
Other than the many ways mentioned above that allow home loan borrowers to achieve financial freedom, property loan borrowers can also use the loan money to pay for a child’s wedding or take care of a medical emergency in the family. All in all, loans against property are an excellent financing option. However, since these loans involve collateral, one must avail of these loans after careful planning.
