Loans against property are a popular financing option for individuals in need of significant funds. However, there are several misconceptions surrounding these loans that can lead to confusion and misinformation. Here, we debunk eight popular misconceptions about loans against property.
Popular misconceptions about loans against property
Misconception: You can only get a loan against residential property.
- Reality: Loans against property can be availed against residential, commercial, or industrial properties, providing flexibility for borrowers.
Misconception: The property will be seized if you fail to repay the loan.
- Reality: Defaulting on loan repayments may lead to legal action, but property seizure is usually the last resort for lenders.
Misconception: Only individuals with perfect credit scores can qualify for these loans.
- Reality: While a good credit score helps, lenders also consider other factors such as property value and income stability for loan approvals.
Misconception: The loan amount is limited to the property's market value.
- Reality: Lenders usually offer loan amounts based on the property's value, but they may consider additional factors like income and repayment capacity.
Misconception: Loans against property have high interest rates.
- Reality: Interest rates on these loans can be competitive, especially when compared to personal loans or credit cards.
Misconception: The property cannot be used while the loan is active.
- Reality: The property remains in the borrower's possession and can be used as usual during the loan tenure.
Misconception: It takes a long time to process loans against property.
- Reality: With streamlined processes and digitization, loan against property applications can be processed quickly, resulting in faster approvals.
Misconception: Prepayment of the loan attracts heavy penalties.
- Reality: Many lenders allow borrowers to make partial or complete prepayments without charging excessive penalties.
In the END
Understanding these misconceptions is crucial for borrowers considering loans against property. It is advisable to consult with lenders or financial advisors to gain accurate information and make informed decisions based on individual requirements and financial situations.
