6 Factors to Consider While Taking Loan Against Property

Posted on Tuesday, June 27th, 2023 | By IndusInd Bank

Loans against property can be a great way to access funds for large purchases or business or personal needs. However, when planning to take out a loan against your property, make sure to consider the following six factors: the loan amount, property ownership, loan interest rate, tax benefits, repayment tenure, and additional charges on the loan.

When it comes to managing a financial emergency, the popularity of loans against property is soaring, thanks to their secure and flexible nature. Marked by minimal documentation and simple eligibility, it is a convenient loan option that can be used to fund various needs such as business expansion, wedding preparation, or a medical emergency.

But most of all, since these loans are secured by a pre-owned property, they carry lower interest rates and are a great way to realise the value of your property without giving away ownership. If you need substantial funds at competitive rates, a loan against property is an excellent choice.

However, before applying for a loan against property online for your financial needs, you must consider these six factors.

1. The Amount of Loan

The amount of loan you can secure typically depends on the value of the property you want to mortgage. For this, banks evaluate the value of the property based on the current market rates. While the finance offered on the property differs with lenders, you can typically fetch a loan amount of up to 80% of the property value.

That said, there are other factors like your monthly income, credit score, other financial obligations, and age that determine the amount of loan you can secure. So, it is best to contact your bank to know more.

2. Ownership of Property

Before approving the loan, the bank will want to make sure that the property kept as collateral is not under dispute. If the property has multiple owners and all of the owners do not agree to apply for a loan, the bank might not approve your application.

So, you must get the consent of all the joint owners in case of multiple ownership and furnish the necessary documents for a smooth application process.

3. Interest Rate on the Loan

One of the key loan against property benefits is that this loan is backed by security and therefore carries affordable interest rates. However, it can vary for different banks based on a number of factors, such as your income, credit score, loan amount, and outstanding debt, among other things.

Because the interest rate you get will ultimately determine how much you’ll end up paying as EMIs, it is important to research thoroughly and negotiate for the best interest rates.

4. Tax Benefits

With a loan against property, whether you’ll get tax benefits or not depends on how you plan on using the funds. You cannot claim any tax benefits under section 80C of the IT Act on the repayment of the loan.

However, under section 24B of the ITA, salaried individuals who have obtained a loan against property to buy a new residential property can claim tax benefits of up to Rs. 2 lakhs on interest payments. Likewise, you may also claim tax deductions under Section 37(1) if the loan amount is used for business purposes.

5. Repayment Tenure

One of the key loans against property benefits is the extended repayment tenure. When availing a loan against property, you can enjoy a flexible tenure of up to 20 years, which can vary depending on the lender.

However, while a longer tenure makes your EMI payments more affordable, it also increases the overall cost of borrowing. This is because the interest rate is compounded, so you end up paying a higher interest amount with a longer tenure. So, it’s a good idea to determine your affordability before deciding on loan tenure.

6. Additional Fees

Finally, it is important to check the additional fees before availing of a loan against property. This would include the processing fee, which will be charged as a percentage of the loan amount and differ for various lenders.

Additionally, in case you want to prepay or close your loan before the tenure ends, you must enquire about the prepayment and foreclosure charges applicable. Considering these charges will give you a fair idea of your loan affordability.

Apply for a Loan Against Property with IndusInd Bank

IndusInd Bank offers you a multipurpose loan against property to help you meet your personal and business financial needs. Featuring an extended loan tenure, competitive interest rates, and higher loan amounts (upto 80% LTV), our loan against property solutions will help you unlock the true value of your property.

Besides, you could choose to apply for a loan against property online by visiting IndusInd Bank website. . Additionally, the convenient doorstep services will ensure a hassle-free banking experience specially designed to meet your needs.

Apply for a loan against property with IndusInd Bank today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.