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Planning To Take A Loan Against Property? 5 Things To Know Before Taking One

IndianMoney.com Research Team | Posted On Wednesday, January 23,2019, 12:24 PM

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Planning To Take A Loan Against Property? 5 Things To Know Before Taking One

 

 

Loan against Property:

 Loan issued on mortgaging a property is called loan against property. Usually 50-60% of the property’s market value can be availed as a loan. Loan against property is a secured loan and is offered at lower interest rates when compared to other loans. Loan against property can be taken for the following reasons:

  • Business expansion
  • Children’s marriage
  • Education
  • Medical expenses

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Planning To Take A Loan Against Property? 5 Things To Know Before Taking One

5 things to know before taking one

1) Types of loan against property:

Type of loan

Maximum amount offered

Loan against Self Occupied Residential Property

Up to 65% of market value

Loan against Vacant Residential Property

Up to 50% of market value

 

Loan against Rented Residential Property

Up to 50% of market value

Loan against Self Occupied Commercial Property

Up to 60% of market value

Loan against Rented Commercial Property

Up to 60% of market value

Loan against Residential Plot

Up to 40% of market value

Loan against mixed use property

Up to 55% of market value

Loan against vacant Commercial Property

Up to 50% of market value

Loan against Industrial Property

Up to 60% of market value

 

SEE ALSO: Mortgage Loan Interest rates, Eligibility & Calculator

2) Loan against property eligibility:

Eligibility criteria for loan against property vary across lenders. Lenders usually don’t compromise on the eligibility criteria. Following are the general eligibility criteria for loan against property:

§  The applicant must have the property registered under his/her name.

§  The applicant must have a good credit score.

§  The applicant must have constant and reliable income                                                                                           

  • Must have all documents related to the property
  • The property must be free of litigation.

3) Loan against property documents required:

Documents required for loan against property varies across lenders. Below mentioned are the general documents:

  • Valid ID proof
  • Valid address proof
  • PAN card
  • Duly filled application form and latest photograph
  • All legal documents of the property
  • Last 6 months pay slips
  • Last 1 year bank statement
  • Form 16
  • ITR statement for last 3 years
  • Business related documents for self employed

4) Loan against property interest rates:

The interest rates of secured loans are lower when compared to personal loans. Below table shows the interest rates of loan against property offered by popular lenders:

Bank

Loan Against Property Rate

Processing Fee

SBI Loan Against Property

10.30%

1.00% 

Max Rs. 50,000

HDFC Loan Against Property

9.75%

1.00% 

ICICI Bank Loan Against Property

11.95%

0.50% 

Min Rs. 5,000 - Max Rs. 10,000

Axis Bank

11.35%

0.50% 

Min Rs. 5,000 - Max Rs. 10,000

Citibank

8.80%

0.25% 

Indiabulls

10.50%

1.00% 

Min Rs. 5,000

PNB Housing Finance

10.50%

1.00% 

Standard Chartered Bank

10.10%

1.00% 

Min Rs. 10,000

DBS Bank

12.15%

0.50% 

Max Rs. 10,000

HSBC Bank

9.70%

1.00% 

Min Rs. 10,000

DHFL

12.00%

2.00% 

Min Rs. 15,000

IDFC Bank

10.00%

1.00% 

Min Rs. 5,000

Central Bank of India

11.10%

0.50% 

Max Rs. 20,000

DCB Bank

12.72%

1.00% 

Andhra Bank

10.75%

 

United Bank of India

10.75%

1.00% 

PNB

10.20%

0.90% 

Max Rs. 45,000

Yes Bank

10.50%

1.00% 

South Indian Bank

10.70%

0.50% 

Lakshmi Vilas Bank

11.55%

1.20% 

Karnataka Bank

10.90%

 

Indian Bank

12.10%

1.17% 

Federal Bank

11.90%

0.50% 

Min Rs. 3,000 - Max Rs. 7,500

Dhan Laxmi Bank

11.68%

1.50% 

Min Rs. 10,000

Corporation Bank

11.40%

1.00% 

Canara Bank

11.70%

1.00% 

Min Rs. 5,000 - Max Rs. 50,000

RBL Bank

13.05%

1.25% 

Min Rs. 7,500

Allahabad Bank

14.15%

0.53% 

Min Rs. 2,670 - Max Rs. 80,100

Union Bank of India

11.60%

0.50% 

Syndicate Bank

11.65%

0.50% 

Min Rs. 500

Punjab and Sind Bank

11.30%

1.00% 

Min Rs. 2,000 - Max Rs. 50,000

Kotak Bank

9.60%

1.00% 

Jammu And Kashmir Bank

12.20%

0.20% 

IDBI Bank

10.20%

1.00% 

Edelweiss

12.00%

1.00% 

Dena Bank

10.45%

1.00% 

Bajaj Finserv

10.20%

1.50% 

Indian Overseas Bank

10.90%

0.62% 

Min Rs. 890 - Max Rs. 8,900

Bank of India

10.65%

1.00% 

Min Rs. 5,000 - Max Rs. 50,000

Vijaya Bank

10.75%

0.55% 

UCO Bank

10.80%

1.00% 

HDFC Bank

9.75%

1.25% 

Max Rs. 10,000

OBC

10.90%

0.50% 

Karur Vysya Bank

11.70%

0.50% 

IndusInd Bank

9.50%

2.00% 

5) Understand pros and cons of loan against property:

§  Evaluate your requirements

You must be aware that availing a loan against property would lock the property with the lender from the day on which the loan is disbursed. Ownership documents of the property must be deposited with the lender at the time of disbursal. If the borrower is unable to repay, then the lender would liquidate the property and recover the dues.

§  There Is No Tax Benefit

Availing loan against property is good considering that interest rates are low. You must be aware of the fact that there are no tax benefits for loans against property. If you are availing loans for the purpose of saving taxes, then this is not the type of loan you should look at.  

SEE ALSO: Loan Against Property For NRI

§  Tenure Is Directly Proportional To Interest

If you are in a financial crunch and need more time to repay, then it’s wise to choose a long tenure.  Borrowers find it comfortable with the longer tenure, but they end up paying more interest making the loan costlier. Assess your financial conditions and decide the tenure accordingly. It is advisable to keep the tenure as low as possible.

§  Compare Lenders

When availing a loan against property, you must not restrict yourself to just 2-3 lenders. There are a lot of lenders offering loan against property, and you must compare and choose the best lender suitable to your requirements. You need to explore the benefits like flexible terms and condition, zero processing fees and no charges for closing the loan early and so on offered by different lenders.  

SEE ALSO: Personal Loan Vs Loan Against Property

§  Read The Fine Print

This is something which most people don’t do. Not reading the fine print leads to complications during the repayment. You must read and understand all the terms and conditions. If you need any clarification, then you must ask your lender without any hesitation.

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