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Things to consider before applying for a loan against property
Posted on Monday, May 16th, 2022 | By IndusInd Bank
A loan against property is a great way to finance big-ticket requirements and purchases. Also known as secured loans, these are are backed by a property that you own that acts as a mortgage. As these loans are backed by a pre-owned property, they carry lower interest rates and usually have higher tenures. LAPs are also a great way to extract value out of your property while maintaining their occupancy.
However, there are a few things that you should definitely consider before opting for a loan against property. Here are 5 of them:
Interest rate on the loan
Interest rates determine how much more you will end up paying on the initial amount borrowed and this is a major factor that you need to consider before applying for an LAP. Interest rates can depend on a lot of factors such as your income, credit score, outstanding debts and present economic conditions. Make sure to get the best deal out of your LAP by negotiating a lower interest rate.
Fixed vs Floating Interest Rate
Also, when it comes to LAPs, you usually have an option to choose between fixed rate loans and floating rate loans. Under fixed rate loans, the interest rate and your EMI remain fixed for the entire tenure of the loan. Under floating rate loans, these interest rates fluctuate based on a benchmark rate. Make sure you research before making the final decision.
No tax benefits
Unlike housing or education loans, where interest payments are tax deductible, LAPs have no tax benefits. So, you will not be able to avail any tax benefits on the interest that you pay towards your loan repayment on an LAP.
Know the value of your property
The amount of loan that you can raise will depend greatly on the value of the property that you keep as mortgage. The finance offered by lenders on your property differs. So, it becomes important to conduct some research regarding how much your property is actually valued.
Prepayment and foreclosure fees
These are charges that you will be liable to pay in case you pay back your loan before its tenure ends. Make sure to inquire about how much your lender charges as foreclosure fees.
Conclusion
So, make sure to keep these factors in mind when opting for a loan against property to get the best deal for yourself.
If you are looking to apply for a loan against property, IndusInd Bank offers some great benefits and features on LAPs, which include a hassle-free online application process, higher loan amounts, the best market interest rates, and more. To apply for a loan against property with IndusInd Bank, click here.
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.
