Myths concerning Loan against Property debunked
In most cases except the personal loan, to get a loan, you must put up an asset as collateral or security against the loan amount. The collateral is the asset that has been put up as security for the loan also known as a secured loan. There is no limit to the assets that can serve as collateral and using your home as security for a loan is known as a loan against property. To avail a loan, one has to provide the property’s legal papers to the lender and the lender has the right to confiscate and liquidate the asset in case you default on your payment. Both the residential and commercial properties can be used as security. The amount of the loan depends on the value of the property.
Myth 1:
A personal loan with a higher interest rate is preferable to a LAP
Higher interest rates make it more difficult to get unsecured loans like personal loans. It’s best to avoid taking out a loan with a higher interest rate if you own a house and have a good credit score. Taking out a low-interest collateral loan shouldn’t be a concern for someone who can make their payments on time and does not miss out on any EMIs. You may save a good amount of money by taking advantage of a cheap secured loan.
Myth 2:
You can borrow up to the value of the property with a Mortgage Loan
Many people have a misconception that they may get a loan worth the entire value of their house. In the event of a secured loan, the borrower can only get a loan for a percentage of the current market value of the property. The benchmark is usually a 60-70% margin of safety. The LTV (Loan-to-value) varies depending on the borrower’s income and creditworthiness. The bank authorizes specific people to determine the property’s value. In addition to determining the current value, they also make sure that it is clear of any legal issues.
Myth 3:
You can’t use the property if you have a mortgage loan
There are no limits to rumors and false information that circulates in this business. When you take out a mortgage on your property, many people are under an impression that they can no longer use that property. That simply isn’t the case; it only happens if you default on your EMI payments for a while and provide no payment. Then only you are at the risk of losing your home. If you pay your EMIs on time, you can afford to live in your home. In any case, the bank is not the owner of your property but a custodian. Banks have the right to request that you surrender your property or seek debt restructuring if you fall behind on your payments.
Myth 4:
Mortgage loans are only offered against a home’s value
There is simply no truth to the claim that commercial property cannot be used as collateral for a loan. Both residential and commercial properties can benefit from LAP. In terms of both property and funds, there are no limits in place. For example, you may use the money for your children’s weddings, college tuition for your children, or even for a family vacation. Banks and NBFCs provide a wide range of flexible choices for borrowers to obtain the largest amount of money at the lowest possible interest rates.
Myth 5:
LAP is only available to those at the upper echelons of the income scale
To become qualified for a loan, one must have a steady source of income. You may qualify for a LAP even if your salary isn’t particularly high. In determining your LTV (loan-to-value), lenders consider factors such as your annual income, capacity to make payments, and credit history. You can get a loan against your home if you are debt-free and have a steady source of income. If you’re looking to obtain an idea of how much your monthly mortgage payment will be, a mortgage calculator can assist.
Time and again we try our best to have dispelled these myths for you, so you are always aware of what is best for financial freedom. One needs to inquire and get access to all the information beforehand when they start planning to take a loan against property. It is always advised to take this loan from a reputable lender to get rewards and discounts on various charges.
For improved cash flow management, you can pay interest-only EMIs throughout the term and refund the principal at the end. Make use of the pre-approved offer functionality to expedite the application process.
