A loan against property is a versatile credit option that allows individuals to pledge their tangible properties and receive substantial loan amounts. It is an effective financial choice for pensioners. Being a collateralised financial product, it helps pensioners or those nearing retirement age fetch competitive interest rates.
However, before availing of a loan for pensioners, individuals must consider all the particularities that expedite the loan application process and make the borrowing productive.
Know how to choose the best loan against property for pensioners
To make the borrowing rewarding, borrowers must consider the following factors:
Loan amount
Before applying for a loan against property, borrowers must assess the loan amount. Lenders generally extend 70% to 80% of property’s current market worth. As property value differs from one lender to another, borrowers must invest time searching for a lender offering the highest loan principal for the pledged property.
Property loan interest rate
One of the effective ways to make a loan against property the best choice is to opt for it at competitive interest rates. Settling for nominal mortgage loan rates reduces the cost of borrowing and helps in making EMIs affordable. Hence, before availing of the credit option, borrowers must compare several lenders and choose the one extending affordable lending rate.
Repayment tenor
Most lending institutions extend a flexible loan tenor. While an extended loan lowers the EMI burden, it increases overall loan expenditure. On the other hand, a shorter tenor increases the EMI liability but opting for it reduces the mortgage loan interest rate repayment, helping one save on cost of borrowing to a great extent. Hence, borrowers must opt for an optimum loan tenor depending on their repayment potential and other monetary obligations.
Prepayment and foreclosure charges
Besides charging loan against property interest rates, lenders also levied charges like prepayment and foreclosure charges on making prepayments or foreclosing the loan account before loan tenor ends. However, borrowers can benefit from no prepayment or foreclosure charges if they opt for the credit option at floating interest rates.
In this context, borrowers must know the other additional charges on loan against property, helping them make an informed decision.
Tax benefits
Borrowers can enjoy tax benefits with a loan against property. Pensioners can claim tax exemption on LAP interest repayment under Section 37 of the Income Tax Act. Furthermore, under Section 24, borrowers can enjoy tax deductions on the LAP interest rates of up to Rs.2 lakh only if the loan principal is used for purchasing a new home. Hence, borrowers need to note that tax benefits are significantly dependent on the end-use of the loan principal.
Furthermore, borrowers should be well-versed with the loan against property application process.
Know how to apply for a loan against property
Borrowers must follow the mentioned steps to apply for a loan against property:
- Firstly, visit preferred lenders official website and select loan against property from the product page.
- Now click on ‘Apply Online. On clicking, the online loan application will be displayed.
- Fill out the application form with necessary personal, income and property details.
- Attach relevant documents and finally submit it.
A representative will contact and take the application process ahead on successful submission.
However, borrowers must also know the things to avoid when availing a loan against property, helping them receive quick loan approval and dodge unnecessary hassles. For instance, opting for an extended loan tenor when borrowers can make quicker loan repayment will affect borrowers’ financial health in the long run. Also, though a loan against property is a secured financing choice, borrowers must not disregard the credit score.
Considering the aforementioned factors will help borrowers reap the benefits of the exclusive pre-approved offers extended by leading financial institutions. These offers available on various financial products like loans against property, home loans, etc., help streamline the loan application process. Intending borrowers can check their pre-approved offers by submitting their names and contact details.
To sum up, loan for pensioners will prove functional only if borrowers know the ins and outs of a loan against property and consider the factors that boost its efficiency. Several lenders are offering loans against property; it depends on borrowers and their research whether the loan option proves to be the best choice or not.
