Owning a property is a matter of pride and what better than using it for the growth and expansion of your business? If you own a property, you can use it to get access to funds for expanding your business. It could be a residential or commercial property and your property can be idle, in use, or leased out. It is possible to enjoy a low-interest rate on a loan against property and the funds can be used for any purpose in the business. Also known as a secured loan, it will allow you to have a high loan amount and low interest. Since the risk associated with the loan is minimal, it will suit your needs and will help the business. Here are a few things you need to keep in mind before you apply for the loan.
Hypothecation of the property– When you apply for a secured loan, you need to hypothecate the property with the lender. This means that the property should be clear of any mortgage and you must have a clear title deed. In the case of co-owners of the property, they will become co-applicants for the loan. The process of hypothecation is simple and hassle-free. Once you repay the entire loan amount, the property will be transferred to your name.
Loan amount– Before you apply for any type of loan, you should have an estimate of the number of funds you need and how you want to use them. Having an idea of the loan amount is very essential. In the case of a loan against a property, the total value of your property will not be the loan amount. The lender will offer a loan for 65% of the value of the property. When you make a loan application, the lender will hire a market valuer who will estimate the value of the property and the loan amount will be based on the same. If you already have a market value report, you can attach it at the time of the loan application.
Interest rate– The rate of interest on a secured loan is lower than that on an unsecured loan. Hence, you will benefit from a low-interest loan. Remember to compare the interest rate offered by different lenders before you make a decision. However, it is important to use the EMI calculator to get an idea of the EMI payable every month. You can find the calculator on the lender’s website and it will ask you to provide the loan amount and tenure, based on which, the EMI will be calculated.
Repayment– You will have to repay the loan in EMIs over the tenure. Since it is a secured loan, the repayment is of utmost importance. If you fail to make the repayment on time, the lender will give you a notice and if you do not make the payment after that, the lender will auction the property to recover outstanding dues. It is your responsibility to make the EMI payment on time and consistent default will push the lender to take this step. Hence, prepare the repayment schedule and stick to it.
Tenure– Since the loan amount is high, the tenure will also be long and flexible. Depending on the purpose of borrowing and the loan amount, the lender will be happy to offer a tenure that meets your needs. You can understand the impact of tenure on your EMI amount using the calculator. If you need a longer tenure, you can speak to the lender about the same.
Due to increasing competition in the industry, lenders are offering low-interest rates on loans against property. This makes it easier for you to repay the loan in time. A lot of lenders allow the prepayment of loans and if you have excess funds on hand, you can consider it as an ideal option. The secured loan will benefit your business and will ensure that the business goals are turned into a reality without any delay. Choose the right lender for your loan and ensure that the EMIs are paid on time. Remember to read the loan documents thoroughly before you sign on the dotted line and in case of any doubts, speak to the lender for clarification.