3 Reasons Why a Loan against Property is Beneficial

The Reserve Bank of India (RBI) always keeps a tight check on the loan against property segment of the lending business. And rightly so. It is the reckless borrowing and lending in this segment that happened in the US that brought the world to the brink of economic disaster. However, in India, the case is different. A 30%-35% margin requirement ensures that lenders are safe and prevents asset bubbles from brewing. It is with such policies that a loan against property becomes an asset for the responsible borrower. Here are the reasons why this is so.

Benefits of Loan against Property

It is cheaper: A secured loan is always cheaper than an unsecured one. The obvious reason is that the lender has recourse to tangible property if you default. This is why loan against property can save you a lot of money in interest costs.

A 2%-3% drop in the interest rates can save you close to Rs5,000/- to Rs7,000/- per month (assuming a principal amount of Rs50 lakhs). You could use these lower interest rates to get rid of some of the expensive overdraft facilities or factoring for your business or for personal reasons like a marriage in the family.

 

It is versatile: A loan against property is available for almost any purpose that you may desire funds for. The lender will not ask too many questions about the usage of funds. This also reduces the amount of paperwork required by significantly. You may have to declare your intention about using the funds, but it is neither mandatory nor legally binding. In most cases, it is just for the lender’s knowledge, a mere formality.

It is easily available: When a lender has a tangible security backing their loans, they have very little to worry about. No wonder a loan against property is available at express speed. It usually takes less than a week from your first point of contact to having the funds in your loan account. Professional lenders may do it over a couple of nights.

 

However, here is a word of caution for prospective borrowers. A Property Loan is a good way to borrow at lower interests if you are in control of your finances, i.e., you are sure that you will be able to make the payments even in the worst conditions. Failure to make these payments can have very unpleasant consequences. Just like all financial instruments, it is a tool, use it wisely!

[Source: http://www.sooperarticles.com/finance-articles/loans-articles/3-reasons-why-loan-against-property-beneficial-578802.html?%5D

Advertisements

Author: homeloan

Use the interactive Home Loan EMI calculator to calculate your home loan EMI. Get all details on interest payable and tenure using the home loan calculator.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s