To overcome a financial hurdle, especially one that arises suddenly, people often turn to their existing investment pools. However, this isn’t advisable since there is a greater risk associated with spending your entire life savings to fulfill another commitment. Applying for a loan with a lending institution can procure instant funds much safer and more orderly.
With so many borrowing schemes available in the BFSI sector today, opting for an affordable loan that caters to your needs can be very confusing. Moreover, since unsecured loans are popular due to their easy application process, people often forget the benefits attached to a secured loan. A loan against property, as the name suggests, is a type of loan that is offered by banks and NBFCs when a borrower pledges his property as collateral.
Since real estate is a high-value tangible asset, a Loan against property (also known as LAP or mortgage loan) can be availed to obtain a substantial amount of money. Moreover, even after availing of a mortgage loan by putting down your residential or commercial space as collateral, you continue to enjoy full occupancy.
Listed below are some factors that make LAP an ideal choice for larger funding.
1) Affordable Interest Rate
Since a loan against property is a secured loan, the interest rate attached to it is considerably lower than that of a personal loan. The figure ranges somewhere between 8.50%-13%, making it affordable for most borrowers. You can also opt between fixed interest rate and floating rate, the former being slightly higher than the latter.
2) Long Tenure
Apart from the rate of interest, the other biggest factor that determines any borrower’s decision to sign a loan agreement is the loan term. Despite longer tenures having higher interest rates, it can be more suitable for debtors who cannot afford to pay extravagant monthly installments to clear off the debt over a shorter course of time. Since mortgage loans are generally approved for a maximum duration of 15 years, you can request larger funding, subsequently creating reasonable EMIs for your repayment schedule.
3) Unrestrained Utility of Funds
Undeniably one of the biggest advantages of a mortgage loan is its unrestricted end use. You are not obligated to inform the lending authorities about how you plan on spending the loan amount. This essentially means that you can use the loan to fulfill any monetary responsibility such as wedding expenses, sponsoring your child’s education, business commitments, home redecoration, or medical urgency.
4) Quick Process
If you have arranged all the loans against property documents required beforehand and your credentials fulfill the necessary criteria, your mortgage loan will be approved quickly, resulting in swift disbursal of money. This feature makes it a genuinely convenient credit tool.
Conclusion
You are prepared with all the loan against property documents required, retain a decent credit score, and have a freehold property at your disposal, availing of a mortgage loan is the best way to go. Low-interest rates and rapid access to large funds make it a better credit instrument than a personal unsecured loan.
