The loan against property is a better option to lend money in case of the availability of the extra property. When the borrower needs money and requires some liquid cash in hand to satisfy our own needs and then repay the amount on time, then the borrower should opt for a loan against the property. The loan against the property can help an individual satisfy dreams and help spend money for personal needs. The loan against the property is a safer way to opt for loans as it provides surety to the lender to recover the money by the seal of assets in case of failure to the repayment of capital. A total of 60-70% of the total property valuation can be taken as a loan, to have opted as liquid cash. If the loan is being opted for the housing, then the borrower can also claim tax benefits on the interest. The loan applicant should read the terms & conditions of the loans thoroughly before proceeding ahead with the loan application. If any misleading terms are found in the agreement then in that case the borrower should either ask the lender to change the agreement terms or else switch to another lender.
The borrower can take the loans with minimal documents and maximum benefit can be taken to satisfy the individual’s requirement needs. The borrower can also add a co-owner to the loan application who may have higher income thus leading to the easy approval of the loan process & giving confidence to the lender and the repayment of the loans. The loans can be disbursed for an educational loan, marriage purposes, home renovation & business expansion. etc. The borrower should have at least good income to repay the loan or else quite good savings to even opt for the loan against the property. The building should not be a dilapidated one, or in a slum area, illegal encroachment, or a disputed property in all such cases the loan proposal may be rejected. The property is jointly owned or with no clear property titles then the borrower loan application can still be rejected. Though all the banks charge the same rates as per the RBI guidelines there is still a slight variation thus while if the borrower can check for the comparative rates to save money on the interest repayment of the loans.
Following are the necessary clauses in the agreement of loan against property:
- Prepayment & Foreclosure clauses:
The borrower should know whether in case of pre-payment of loans rebate would be provided for early repayment or else a penalty would be charged. Different banks have different terms & conditions for the repayment of loans. Thus the borrower should carefully check the charges being applicable for early repayment or foreclosure.
- Repayment value of the loans:
In the case of the loan against property interest of 9-11% is being charged to the borrowers. And the interest amount is chargeable on a compounded annual basis. Thus the exact repayment value of the loans should be known to the borrower. The borrower should also evaluate the repayment value on the EMI calculator and verify if the amount entered on the agreement is correct or not for safety purposes.
- Definition of default:
The term default is regarded as the non-payment or EMI for a duration longer than 90 days. However, some banks or NBFC’s may term default in case of non-payment of dues even due to death of the borrower, divorce with the co-applicant, or litigation. Thus the term default should be understood carefully before proceeding ahead with the loans.
- Penalty on delayed payments:
The borrower should understand the penalty dues being applicable in case of non-payment of dues beyond the due date. The amount liable to be paid as a penalty should be mentioned in the agreement.
- Notification clause:
Some banks may have the clause that the borrower should notify the lender about the promotion received in the job, switching of jobs, or else changing the address within the city or shifting to any other place within India or out of India to the lender. In case of not notifying the lender, the lenders may charge a non-compliance penalty to the borrower.
- End date of the loans & tenure:
The borrower should be aware of the end date of the loans and the number of years for which the loan is being sanctioned. All verbal communication done with the bank’s representative should be ensured that it is mentioned in the clause agreement.
The borrower must be aware of the terms & conditions of the loans before proceeding ahead with the loans. The above-mentioned clauses can help the loan applicant from getting misled or cheated by the lender in case of availing loan against property. The borrower should ensure that whatever terms are being communicated verbally by the bank representative should be mentioned written in the agreement. There should not be any terms missing in the agreement.
