The property you own can help you when you most need it through a loan against property. But when it comes to loan against property, there are a lot of misunderstandings. Most people avoid or do not reap the benefits of a loan against property due to these misconceptions.
These common myths can hamper your ability to get a loan against property. That’s why we decided to debunk some common loan against property myths and help you understand how your property can help your business or in times of an emergency.
1. You get to avail a loan worth 100% of your property value
One of the most common beliefs about getting a loan against property is that the loan amount you will get will equal the value of your property. This is untrue. According to official norms, banks can lend up to 60% to 70% of the value of your property. Thus, before you apply for a loan against property, make sure you calculate how much you might get based on the loan-to-value ratio of your lender.
2. A loan against property comes with limitations on usage of funds
Several people believe that a loan against property comes with limitations on fund usage. However, there are no set restrictions on how you utilize funds availed through a loan against property. You can use a loan against property to boost your business, fund your child’s education abroad, to buy a home, or for any other purpose that you deem fit.
3. Loan against property is given on purchase value
The amount you can avail of through a loan against property is determined on the basis of the value of the collateral. Several possible applicants believe that a loan against property is given on the basis of the purchase value of the property. This is not true. The value of the loan amount disbursed is determined by the current value of the property. To be more precise, it is decided upon 60% to 70% of the current value of the property.
4. The use of the collateral property is not allowed
The most common loan against property myth has to do with the usage of the collateral. People fear getting a loan against the property because they believe they will not be able to use the property they offer as collateral. If they get a loan against their home, they won’t be able to live in it.
This is a myth. There are no restrictions on the usage of the property. You can continue to live in your home or work in the business space/workspace you offer as collateral.
5. Only residential property can be put up as collateral
A lot of loan against property applicants put up their residential properties as collateral, believing that only homes, bungalows, or villas can be put up as collateral. However, according to RBI regulations, any plot, land, or property, including residential homes, can be offered as collateral for a loan.
6. A loan against property is the same as getting a home loan
For some, a home loan equates to a loan against property. But it is not true. A home loan is offered exclusively to buy a particular home. On the other hand, a loan against property involves getting a certain amount for any use by offering a residential or commercial as collateral.
7. You should not offer your home as collateral
People avoid pledging their home to a lender believing that there are risks to getting a loan against it. This is false. If you have your documents in order and make your EMI payments on time, no risks come into play with your loan against property.
8. A loan against property charges high interest
People avoid applying for a loan against property due to high-interest rates. While a loan against property charges slightly high interest, it can be a great alternative to a home loan, a personal loan, or a business loan. Especially in case of a financial or medical emergency.
And they were busted! Now that we have debunked commonly held myths about loan against property, you can go ahead apply for one with more information and confidence.
Before you apply, make sure you have your property documents in order. Evaluate the amount you need and check if 60% to 70% of the current valuation of your property matches your need. Ensure you read all loan-related documents and terms carefully before applying.
Once you are ready to apply, head over to ApnaPaisa.com, where millions of borrowers have already gotten the best deal on loan against property. Reach out to the best lenders in the market in a jiffy and let them contact you to offer their best deals.
What are you waiting for? Head to ApnaPaisa.com to get more on loan against property today!