Financial emergencies and obligations might arise any time and when they do you require sufficient funds to help sail through them. You might not have sufficient funds in your savings to meet your financial requirements. This is when loans help. Loans give you the required money to fund your requirements and prove useful. There are different types of loans for different needs and a loan against property is one such loan which is quite popular. The loan is offered against the value of the property which you mortgage to the lender and allows funds that can be used for anything.
Pros and Cons of Loan Against Property
A loan against property has many advantages and also some disadvantages. These include the following –
1. Multipurpose loan
The loan is a type of a personal loan which can be used for any need whether it is personal or commercial in nature
2. High quantum
Since the loan is offered against the value of the property, you can avail of substantial funds from the loan.
3. Low-interest rates
A loan against property is a secured loan as it is secured against the mortgage of the property. Being a secured loan the lender faces lower chances of defaults. As such, the loan is offered at low-interest rates which are affordable for the borrower.
4. High repayment tenure
You get repayment tenures of up to 15 to 20 years to pay off the loan. Such high tenures ensure that the EMIs are affordable and allow you to pay off the loan without burning your pockets.
5. Flexibility on the usage of the mortgaged property
Though you have to mortgage the property for availing the loan, you do not lose the ownership of your property. You can continue using the mortgaged property for residential or commercial purposes. Moreover, you can also let out the property to earn rental incomes even when the property is mortgaged.
6. Easy eligibility criteria
The eligibility criteria for availing a loan against property are quite simple and basic. You can, therefore, easily apply for the loan and avail it without any hassles.
Disadvantages of loan against property
1. The loan is available only if you have a property
You can avail a loan against property only if you are an owner of a property. Thus, the loan is not suitable for individuals having no property ownership.
2. Bank can sell off your property
If you default on repaying the loan, the lender has the authority to sell off your property to realize the outstanding loan. You, therefore, face a risk of losing your property.
3. Long time for loan sanction
Lenders sanction loan against property only after various formalities are conducted. These include independent valuation of the property by the lender, scrutiny of the documents of the property, credit check of the borrower, etc. Thus, the loan is not available instantly for emergencies.
Though the loan has some disadvantages, the advantages outweigh them. Bear these benefits and drawbacks of loan against property whenever you apply for the loan so that you are well-informed.