Loan against Property: Why should you opt for it?

Loan against Property: Why should you opt for it?


Loan against property is a loan that you take while mortgaging your property with the bank. The loan is given according to a certain percentage of the property’s market value. Usually,the bank lends up to 50%-60% of the property. It is a secured loan as the bank keeps the collateral with it. In case a person defaults, the bank has the right to sell your property to recover the money.

What can you do with the loan against the property?

You can use your loan amount in funding your child’s education, for the wedding of your child, for funding your dream vacation, for the expansion of your business, and for any medical treatment.

Benefits of loan against property:

There are various reasons why you should opt for a loan against property. Few of them are:

  • Low-interest rates:

As the bank keeps property as collateral, the rate of interest is kept low in comparison to personal loans. The mortgage loan interest rate ranges from 12 to 15 percent while the personal loan interest is as high as 15-25 percent.

  • Almost no pre-payment charges:

You can make a pre-payment of the loan against property without any charges, which is usually not the case in other types of loan.

  • Easy to get:

As the loan is given on the property, these loans are secured ones. Hence getting these loans is not difficult.

  • Long duration:

These loans are available for the duration as long as 15 years while other loan duration ranges between 7-10 years.

  • Low EMI:

The tenure and the EMI are inversely proportional means that if tenure is long, the EMI’s are going to small. As these types of loans have a long duration, it is suitable for the people who cannot afford to pay higher EMIs. However, one should note that interest burden is higher on the long tenure loan while it is low in short tenure loan. 

Property that can be mortgaged:

There are various types of properties that you can mortgage like a self-occupied house, a rented property, or even a piece of land. However, the only important thing is that the property should be free of any litigation. The title of the property should be clear and should have no dispute.

How the loan amount is determined?

There are many factors that the lender keeps under consideration while determining the loan amount like income, spouse’s income, age, and the value of the property. The bank usually approves 60% of the value of the property.


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