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Truth behind 6 common loan against property myths

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Pune (Maharashtra) [India] Sept 14 (ANI/BusinessWire India): When you require significant financing, a loan against property is a good loan to opt for.

This is because the sanction comes with no spending constraints, which means that you can use it to fulfil any financial need. Further, as you pledge a high-value asset, the interest rate levied is lower when compared to unsecured loans. This is due to the fact that the lender enjoys a higher level of security and can recover losses easily in case of non-payment.

Bajaj Housing Finance Limited is offering a Loan against Property to manage your high-end expenses with ease. Now be it financing your child's education, managing your wedding expenses or even handling unforeseen medical expenses, this loan enables you to do it all.

Despite its many advantages, there are a number of misconceptions that people have about this loan offering. Take a look at the truth behind 6 such myths so that you can make a smart borrowing decision as and when the need arises:

Myth 1: You should never pledge your home as collateral for a loan

The truth is that having your home as collateral carries no risk whatsoever if you are consistent with repayment and have a plan in place. In fact, pledging your home acts as an incentive to be diligent with borrowing and repayment, as there is more at stake. Therefore a loan against property can help you make better decisions and result in good financial health in the long run.

Myth 2: You cannot use the property that you pledge

This is a common misconception, but it's important to understand that you're simply pledging property and there are no constraints on using it. This means that you can continue to live in your residential property even while you pledge it, as long as you aren't consistently defaulting on payments.

Myth 3: You can borrow a loan amounting to the full value of the property

Generally, when you borrow a loan against property, your sanction is determined by taking into consideration a number of factors. An important one is the current market value of the property. Once the lender ascertains this, it arrives at a sanction on the basis of the loan-to-value ratio. Depending on the lender, you can get anywhere between 75 per cent and 90 per cent of the property's value as a sanction.

Myth 4: You can only get a loan against a residential property

This is false as you can pledge both commercial and residential property as collateral for a loan against property. Additionally, you can use the sanction to purchase property as well. Moreover, as there are no restrictions on usage, you can use it for financing a foreign education or a destination wedding.

Myth 5: The sanction is based on the price at which the property was bought

This is entirely untrue as the lender calculates the loan amount based on the current market value of the collateral. This is determined by the lender's evaluators and there are few other factors that are taken into consideration, such as the age and current condition of the property. A poorly maintained property may be less valuable and fetch a lower sanction regardless of how much it was worth at the time of purchase.

Myth 6: The lender takes possession of the collateral when taking a loan against property

This is false and in reality, you retain full possession of the collateral so long as you don't default on payments. This misconception arises from the way a gold loan is handled; however, in case of loan against property, all you have to do is submit the property documents to the lender.

Now that these myths have been addressed, you are better prepared to understand the benefits associated with borrowing a loan against property.

To enjoy value-added benefits, take this loan from a top-tier lender. For example, besides a large sanction of up to Rs 3.5 crore, the BHFL Loan against Property also offers a Dropline Flexi Loan facility.

This allows you to borrow as per your needs and pay interest only on the amount utilised. To take advantage of these features, check your pre-approved offer and enjoy speedy, hassle-free application.

This story is provided by BusinessWire India. ANI will not be responsible in any way for the content of this article.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sat, September 14 2019. 16:09 IST
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