As an owner of a residential or commercial space with a good resale value, you have the option of leveraging your asset to obtain a huge loan amount on economical repayment terms. A loan against property offers you funding running into crores coupled with long tenures and affordable interest rates. While using your asset as a security already involves maximising its utility, you can benefit further by making smart loan-related decisions. To illustrate, here are 5 ways by which you can gain more from your loan against property.
Choose Your Principal And Tenure Wisely So As To Keep Repayment Comfortable
Today, any individual taking a loan against property in India can obtain funding up to around 70% of the property’s market value. However, while you do not under-leverage the value of your asset you shouldn’t utilise it beyond your means either. That is to say, you should restrict the principal to an amount that you foresee to be repayable.Likewise, if you possess an asset that is well-kept and in good shape, you can expect to fetch a long loan against property tenure, often up to 20 years. While a lengthy repayment term reduces each individual EMI, it increases the net amount you spend on interest over the years. For example, if you take a Rs.30 lakh loan for a 200-month tenure at a 10.5% rate of interest your EMIs are Rs.53,037 and the total interest you pay is Rs.56,07,314 Conversely, if you reduce your tenure to 180 months, your EMIs increase to Rs.55,270 but the total interest you pay reduces to Rs.49,48,575.So, as you opt for this collateral-based loan, use an EMI calculator to ensure that you are neither overspending nor underutilising your asset.
Make Prepayments And Consider A Balance Transfer To Cut Down On Interest
Another way to reduce your total interest payments is to make prepayments when surplus funds fall into your lap. When you make a prepayment, you pay off a portion of your debt over and above the EMI. By clearing a portion of your principal in this way, you reduce your subsequent EMIs and also the total interest you need to pay at maturity. Though this comes at a nominal fee, it can be worth it when you weigh the amount you can save in the long run. Additionally, you should be able to make prepayments at nil extra fees when you take a floating rate loan.In case you notice that your current lender’s interest rates and prepayment terms are not as affordable as those of other lenders consider a balance transfer. While this too involves processing fees, you can reduce your interest payments dramatically by securing a loan with a rate that is approximately 0.5% lower than the one you are currently on.
Claim Tax Benefits Wherever Applicable To Reduce Your Annual Liability
Even though a loan against property can be used for multiple end-uses, tax reliefs are limited to a few. That is, while you can use the finances for a wedding, to consolidate debt, to finance an international vacation or send your child on an overseas programme, you can claim deductions only when you use the funds for specific business or housing needs.To elucidate, Section 24 allows you to claim interest deductions in case you use the funds to finance another residential property. Similarly, Section 37(1) allows you to claim as business expenditure the interest and other fees like processing and documentation charges when you use the finances for your business’ needs.
Pledge Your Asset With A Lender That Offers Cost-Effective Borrowing Options
While every lender will offer you impressive loan amounts, not all will offer equally striking repayment terms. To illustrate, consider how the Bajaj Finserv Loan Against Property makes it easy for you to go about repaying your loan. To help you tailor your borrowing to your needs Bajaj Finserv offers you its Flexi Hybrid facility. This feature allows you to borrow from your total sanction, in portions, multiple times, and only pay interest on the amounts utilised. Further, it lets you ease into repayment by offering you the option to pay interest-only EMIs for a part of the tenure and the principal later. Finally, you also get the freedom to make prepayments, redraw finances, and even foreclose your loan at no extra charges whatsoever.
Capitalise On The Simple Eligibility Terms To Boost Your Business Or Fund A Special Need
Loan against property eligibility terms can be considerably simpler than those of other credit options. You can make use of this to finance a need that would otherwise not get funding so easily. For example, if you desire a large business loan to expand your start-up you normally require to have generous turnovers and a sufficient business vintage. However, a loan against property lends you funding on simpler terms.Similarly, when you apply for an education loan your child requires to have outstanding entrance results, secure admission at a reputed college, apply for a job-oriented course. However, you can get a loan more easily here by meeting the personal and financial criteria and submitting the loan against property documents required like ITR, Aadhar Card and property papers. By doing so you gain instant approval and access to customised financial deals, and hasten your disbursal as well.