Indian loan against property market is witnessing a meteoric rise in recent time. The growth can be attributed to the availability of high-value loan amounts at a nominal interest rate. A loan against property is sanctioned to an individual against property as collateral.
To reap maximum benefits, borrowers must know about the property loan interest rates and the additional fees related to availing the loan amount beforehand to save time and make the lending process hassle-free.
Type of loan against property interest rates
Lending institutions offer loans against property at both fixed and floating rates of interest:
- Fixed interest rate: In this, the interest rate remains the same for the entire repayment tenor. Borrowers EMI payouts are not affected by market fluctuations.
- Floating interest rate: As the name suggests, in this the interest rate changes with fluctuations in market status. Lenders set the interest rate based on the index rate or base rate as established by the RBI.
Borrowers can settle for any of the above choices depending on certainty or going as per the market trends. Individuals should compare the interest rate of various commercial institutions before they apply for loan against property.
Fees attached to loan against property
Borrowers availing of loan against property are required to pay some nominal charges to the lending institutions apart from paying out EMIs, these include:
- Processing fees: Processing fee or application fee covers administrative cost, cost of carrying out credit checks and accessing property’s value. Lenders will charge one-time loan processing fees from borrowers availing loan against property. This amount is deducted from the loan amount before disbursal.
- Part prepayment charge: Borrowers must ensure that the lending institution they choose offers low or nil prepayment charges.
- Foreclosure charge: If a borrower repays the loan amount before the loan tenor, lenders levy a foreclosure fee. Borrowers must ensure that the loan option they choose has less foreclosure charge.
- Penal interest charge: when borrowers fail to repay their EMI payments, lenders impose a penalty on them. This penalty is charged over the interest rate. To avoid such charges borrowers must schedule their repayment of EMIs in advance.
- EMI bouncing charge: If a borrower repays EMI payments by cheque and the signed check gets bounced, lenders will levy an EMI bouncing charge. Borrowers will have to pay EMI bouncing charge along with EMI of that particular month, which will add to the additional expenses.
- Loan rescheduling charge: Borrowers can extend the loan repayment tenor, which will result in fewer EMI payouts. However, lenders will charge loan rescheduling charges from borrowers doing so.
- Statement charges: Lending institutions charge a nominal amount from their customers to issue documents. Loan statements updates about the progress of the loan. The updates are sent to borrowers in the form of hard copies. Statement charge covers the printing cost of these hard copies.
However, borrowers can skip paying these charges by shifting to managing loans online.
It is imperative to note that all these charges differ from lender to lender. Also, borrowers must keep in mind that the above-mentioned charges are not calculated under the interest rate.
Steps to apply for a loan against property online
Step 1: Go to the official website of the preferred lending institution. Fill out the application form with necessary details.
Step 2: Submit the necessary documents.
Step 3: Right after filling the application form and submitting documents, a representative will contact the borrower and verify all the parameters.
Once the verification is over, borrowers will receive the loan amount within the given time. However, borrowers will have to meet the eligibility criteria of loan against property to get instant credit disbursal.
Furthermore, borrowers willing to avail of loan against property can check the pre-approved offers extended by several financial institutions. These offers accelerate the lending process and make it hassle-free. One can check the pre-approved offers by submitting details like names and contact details.
On the whole, by availing loan against property, one receives instant funds by pledging his/her property as collateral. However, borrowers must know about the varied loan against property interest rates and additional charges levied by financial institutions before making an informed decision.