5 Lesser Known Uses of Loan Against Property.

Saving is an extremely important aspect of the financial planning of every individual. However, there may be times when you pass through a rough patch and require a bit of financial aid to tide over troubled times. In case you are looking to borrow for the long term, you can resort to obtaining a loan against property by mortgaging your house or land. The key reason why taking a loan against your property is a good idea is that the interest rates are lower compared to a personal loan, which features interest rates that can be as high as 20%. Taking a loan against property should not be an option only during times of distress but for fulfilling other goals as well. Let’s take a look at a few unexpected uses of loan against property:

1. Paying off your credit-card debt

Falling into a vicious cycle of a credit card debt is one of the worst situations that you can come. If your credit card bills have spiralled out of control, it is better that you take a loan against your property to pay off your credit card debts. The interest rates on credit cards are sky high and you will fall into the vicious cycle of debt repayment on your credit card if you do not pay it all at once to end it. It is wiser that you repay the loan on your property at cheaper installments than to pay for the exorbitant interest rates that credit cards charge, which range from 24%-46% annually.

2. Pursuing higher education abroad

Quality education isn’t cheap and in case of high education loan amounts, bank accepted collateral such as property is mandatory. Many people also choose to send their children abroad for further studies by taking a loan against property because at times getting a education loan comes with multiple hassles. Whether it is for yourself or your children, you can resort to a loan against property to meet the educational needs of your children.

3. Expanding/Establishing your new business

When you have a business which you want to restructure and grow, you will require substantial amount of capital to do so. You can resort to mortgaging your property to meet the essential costs for bringing about these structural changes, meeting operating expenses and hiring resources among other necessary costs. The good thing is, you have a time frame of up to 15 years for the repayment of the loan and the interest rates are quite low since a loan against property is a secured loan.

With the rising fad of boutiques and fancy restaurants, it is not a bad investment idea to take a loan against your property to meet your entrepreneurial goals. If you have a business idea in mind, you can go ahead and finance your business by taking a loan against property. However, an element of risk remains in case you are unable to repay the loan taken. Hence you must have a proper business plan in place and improve your chances of running the business successfully before taking a loan against property.

4. Taking off for your dream vacation

Have you been planning a dream vacation to an exotic location since forever but never managed to take one due to financial constraints? If you think you truly deserve a break then you can take a loan against your property to take a much deserved break. It is not such a big deal, as long as you know you can repay the loan within the stipulated time. As the interest is cheaper, your Equated Monthly Installments (EMI) will also be lower, which makes it a better option than to opt for a personal loan to take a vacation.

Conclusion

In conclusion it must be pointed out that loan against property has emerged as a top choice among borrowers seeking a long term borrowing option for a variety of personal and family expenses. One of the primary reasons for this is that the use of money borrowed through LAP has minimal restrictions similar to a personal loan, which is another point in favour of this mortgage loan. But what really sets loan against property apart from other loan options in the market is the incredibly low interest rate as compared to other options such as personal loans.

{Source: http://www.paisabazaar.com/home-loan/articles/7895-5-lesser-known-uses-of-loan-against-property/}

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Banks cautious on growth in loans against property.

Banks have begun to adopt a more cautious approach to loan against property (LAP), which had been one of the fastest-growing segments under the retail segment in the last few quarters. This comes at a time when competition has increased significantly, as not only the banks but even non-banking financial companies (NBFCs) are getting increasingly active in the space.

“Even though this is a secured lending space, banks are getting a little cautious in lending to this segment. This is because too much expansion that we have seen in the past few quarters in a particular segment can lead to pressure points going ahead and therefore we are being more diligent,” said S K V Srinivasan, executive director, IDBI Bank.

In fact, earlier CRISIL had also warned about the risks emerging in this segment due to the rapid growth adding that loan against property had the potential to grow to Rs 5 lakh crore by 2019, almost double its size a year ago. Nomura, too, had earlier stated there could be potential risk to banks in their loan against property segment if property prices corrected.

Private Banks, especially, had been very active in this segment as they have been leading the growth in the retail segment. However, most of them have now calibrated the growth saying the rate of incremental growth is tapering off.

“Within loan against property we have become cautious in lending to specific segments such as non-resident Indians (NRIs) as sometimes the cash flows and other parameters are not very clear and so even if the segment still continues to grow it is not as rapid as we saw in the last financial year,” said Jose K Mathews, general manager-Retail Banking, Federal Bank.

At a time when banks had been going slow on lending to the small and medium enterprises (SME) segment because of the overall slowdown in the corporate segment, loan against property had emerged as a safe alternative for financing, both for SMEs and the lenders.

However, some analyst believe that in chasing this growth banks have also been lending to the risky commercial segment and have also increased the loan-to-value (LTV) ratio which can prove to be a problem in the times to come.

However, since lenders do not give a break-up of the bad loans in the retail segment, it is difficult to assess the quantum of bad loans. But analysts point out that even though it remains comfortable for lenders now, there could be pressure in the future if the high LTV and risky lending is not brought down.

{Source: http://www.business-standard.com/article/finance/banks-cautious-on-growth-in-loans-against-property-116061300808_1.html}

Tips to consider while applying for property loan.

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Taking the Home Loan Path: 5 Common Mistakes.

You may choose to take out a home loan when buying a property for a number of reasons. It could be because you do not have that kind of money and you can earn well enough to pay off your EMI, or it could be that you have the money but you want to use it to make more money and faster than the interest rates. Whatever the case may be, if you plan to take out a home loan, you are prone to a couple of pitfalls.

Once you are aware of these five common mistakes, you will have a better idea of how to go about taking the home loan path to buying your house.

Ignoring Your Cibil Score

Cibil is an agency that rates your creditworthiness, as in, they give you a score out of 900 to indicate how much should banks trust you in loan matters. Knowing this score can be a bargaining tool for you. If you have a good score, one that is above 700, it will give you more options to negotiate for better loan terms. You can ask Cibil directly to provide your Cibil score to you.

Applying for Other Loans as well

So you're looking for a home loan but are simultaneously applying for other loans as well, like personal loans and credit cards. It does look poor on you as you'll look 'Credit Hungry' and Cibil and the banks will usually blacklist you as a financial risk. When taking a Loan against Home, make sure you free up all other loans six months prior and just focus on the home loan.

Picking the Wrong Bank

It is easy to just go with the bank you are most familiar with, when the truth is that you could have found a better deal elsewhere. Do not shy away from looking for more options. Go to as many banks as you can and even ask your friends and family which bank they chose for their loans and why. There are more factors to consider than just offered interest rates, such how their services are, what their system of calculating fluctuating interest rates is, etc.

Ignoring Pre-Approval from the Bank

Do not ignore the pre-approval on your loan as banks offer it willingly and for free. Getting a pre-approval from your bank will cut down on the overall time, and makes the processing of your loan much easier when the time comes.

Getting Attracted to Big Loans

Bigger is not always better when it comes to home loans. Just because a bank offers a bigger loan doesn't mean you should take it. Sure, you could buy a bigger house, but you will also carry a bigger burden. When taking a home loan, your goal should be to nullify it as soon as possible. So get a lower home loan, pay a higher EMI for a shorter tenure.

[Source: http://ezinearticles.com/?Taking-the-Home-Loan-Path:-5-Common-Mistakes&id=8519786]

Know about your monthly Installment with EMI Calculators.

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Loan Against Property Benefits Over other Loans.

There may arise a situation, when you are in dire need of money for some reason, and options like borrowing money through friends or family members are always available to you. There are some more options which can raise large sums like loan against property or more popularly known as LAP. It is a convenient and easy means to have access to the funds and meet the financial requirements with the help of the banks at lower rate of interest. You can use your property to have an access to the funds as offered by the banks. In general cases, the banks offer as much as 70% of the loan amount based on the evaluation of the property being offered by you as collateral.

Benefits of Loan Against Property Over other Loans

One must always keep a fact in mind when we talk about loan against property that this loan is a secured loan. Therefore the bank never hesitates in offering a good loan amount against the property being used as collateral.

Cheaper Loans Option

While several loans are available in the market like personal loans, the loan against property holds a huge advantage when in comparison with such loans. The loan against property is the cheaper loans comparatively personal loan and thus, is an effective way to meet your needs and demands during the times of financial need. Another fact states that, only home loans are cheaper than the loan against property and thus one can quite easily evaluate the beneficial part considering the rates of interest.

Long Tenure

Another advantage associated with the loan against property is the loan tenure, which is much longer in this case, while personal loans, have a short duration ( a maximum of 5 years) for loan repayment, the loan against property is a good option, with the tenure extending to around 20 years, in case, the loan amount is high.

Small EMIs

Since the loan tenure is of long duration, the EMIs are automatically going to be small. The EMIs are small and thus making it easy for the borrower to pay the loan amount and its interest with much ease.

Secured Loans

While the loan against property is a secured loan, claiming for this loan is quite easy in comparison to the other loans, which required high effort to get cleared. Only requirement for this loan is a clear title of property and all the necessary proofs to support it.

Property Options

The options are wide when it comes to putting the property as collateral in case of mortgage loan. An individual can put off either a residential property or a commercial one for the purpose of seeking loan. Even, one can claim the loan against the property with the piece of land or even through the property under construction, thus providing a wide range of options for the people looking for the loan against property.

EMI Based Loan or an Overdraft Facility

Several banks offer a feature associated with the loan against property in the form of the paying up of loan amount either in the form of EMI Based loan or an overdraft facility, suiting your needs. The overdraft limit will be decided by the evaluation of the property and your account history.

Fulfill All Your Needs

While the loan against property can be used to meet all the needs of your personal life, there are no restriction attached to this loan. While except personal loans, one has to furnish all details of the specific purpose of loan. For example, in case of educational loan, you need to furnish all details of the educational finance needs, marriage loans, car loans requires the car to be bought etc. The amount as claimed under the loan against property can be used in all legal demands and needs of the person and one can use the money in the way, the person want.

For example, one can use the money in expanding the business or for vacation. One can fund the medical treatment or for studies of kids or marriage of their kids or any other life event. Even, it can be used to close off other high cost loans, which are affecting your personal life or the way you live.

The loan against property can be used to meet all the demands and needs of an individual just like personal loans, and thus there is no bond as such associated with the loan against property.

Top Up

Another important aspect of loan against property states that if the value of the property rises during the tenure of loan, the borrowers have the option to get a top up on the existing loans. This aspect can be very helpful to the person especially in case, if he/she is a business owner.

Pre Closure

With the per closure options available just like many other loan types, the person can prepay the loan amount and get rid off the liability. However, in some cases, like in fixed rate of interest cases, the person has to pay the prepayment penalty just like in other loan types.

The decision to adopt the specific loans completely depends on choice of an individual and the choice can depend on several other factors. While the loan against property is one of the best ways to raise funds in quick time specially when the required loan amount is high. With almost no disadvantage as long as you are able to repay the loan there are no hassle associated with the loan against property and calls out for the best choice.

{Source: http://www.mortgage-loan.in/loan-property-benefits-loans/}

Ways to improve your CIBIL Score.

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Here’s What No One Tells You about Loan against Property.

A loan against property is just that – a loan you get against a property you need to keep as collateral. This makes loan against property a secured loan.  The borrower gives a guarantee of repayment using the property as the security.

The rate of interest for a loan against home differs from Bank to Bank. The tenure of loan against property can be up to 15 years.

Loan against property is a fantastic way to arrange for funds when you want to meet any type of high expenses. The list below includes (but is not limited to) what it can be used for:

• Wedding
• Setting up a business
• Purchasing a new home/ land/commercial property
• Studying abroad
• Medical emergencies
• Travel/ Vacation/Honeymoon

The financial information, capability for reimbursement, and value of the property are the majority normally assessed. But other common factors banks look at are:

• Your income
• Savings
• Debt
• Value of the property mortgaged
• Your past repayment record for loans, credit cards, etc.

Benefits of loan against property

• The long tenure of LAP makes the EMI more reasonable
• The loan amount is much superior as compared to a personal
• As it is a secured loan. the rate of interest is lower compared to any other unsecured loan
• You have the chance of liquidating LAP whenever surplus funds are available without incurring a prepayment penalty
• LAP can be easily refinanced through other lending institutes

{Source: http://www.finheal.com/blog/heres-what-no-one-tells-you-about-loan-against-property/}