What are the benefits of a loan against property in India?

Meet Anjali, a small business owner. Over the years, she has built her business from the ground up, but she now faces a challenge—her business requires expansion, which requires significant capital. While considering various financing options, she wonders if a solution offers substantial funds at a reasonable cost. That’s when she discovers the benefits of a loan against property, a financial product that can help her leverage her property to meet her needs.

Anjali is not alone. Many homeowners and business owners across India face similar situations where they need access to large funds, whether for business expansion, home renovations, or even managing personal expenses.

If you, too, are in a similar situation, read on to explore the benefits of a loan against property. You will understand why it is a cost-effective, flexible, and secure solution, which will assist you in making a financing decision.

The seven benefits of a loan against property in India
 

Before we study property loan benefits, let’s clarify what they are. A loan against property (LAP) is also known as a collateral loan.

So, what is a collateral loan? It is a type of loan where you can pledge your property as collateral to secure the loan amount. As such, the lender has the right to seize your property if you fail to repay the loan. However, the primary intention is not to take ownership of the property but to ensure the loan is repaid.

Now that you know the meaning, let’s examine the benefits of a loan against property -

●  Access to large loan amounts

One of the primary benefits of a loan against property is the ability to access large sums of money. Unlike personal loans, which are capped at lower amounts, this mortgage loan allows you to borrow funds according to the market value of your property.

This feature makes it ideal for significant financial needs, such as business expansion, purchasing commercial property or expensive equipment, or home renovation.

●   Lower interest rates

Other key benefits of a loan against property are the lower interest rates than unsecured loans like personal loans. This is because the loan is secured by your property, thus reducing the lender’s risk. It reduces your borrowing costs over the long term.

●   Flexibility for collateral

With a LAP, you can enjoy the flexibility of using different property types as collateral. Whether you own residential, commercial, or industrial property, you can use it to secure a loan. This flexibility is one of the key benefits of a loan against property, as it allows a broader range of property owners to access this cost-effective financing option.

●   Longer repayment tenure

Notable benefits of a loan against property include its extended repayment tenure. With terms extending up to 25 years, you can spread the repayment over a more extended period. This will reduce your equated monthly instalments (EMI), enabling you to manage your cash flow and plan your finances easier over the long term.

●  Retain ownership of your property

Unlike selling your property to raise funds, a LAP allows you to retain ownership while utilising its value. You continue to relish the benefits of your property, such as rental income, all while using the funds for your financial needs.

●  Tax benefits

If you access the loan against property for business purposes, you can claim the interest paid and processing fees on the loan as a business expense. It reduces your taxable income and results in tax savings. You can enjoy these benefits of a loan against property under Section 37(1) of the Income Tax Act, 1961.

Moreover, if you use the funds from an LAP to buy a residential property, the interest paid is available for tax savings. This benefit is available under Section 24(B), with a maximum deduction of ₹2 lakhs.

Why choose IDFC FIRST Bank Loan Against Property
 

When considering LAP, choosing a lender that offers not just competitive rates but also additional features that can enhance the overall borrowing experience is essential. Loan Against Property meets these needs with various features that make it a standout choice for both salaried and self-employed individuals.

●  High loan-to-value (LTV) ratio

One of the standout benefits of a Loan Against Property is the high LTV ratio. You can borrow up to 80% of your property’s market value. You can borrow more money to cover your financial needs.

●  Digital application process

IDFC FIRST Bank offers a hassle-free, fully digital application process. You can apply for a LAP from the comfort of your home or office. This streamlined process reduces the time and effort required to secure the loan and ensures a quick disbursal of funds.

●  Higher loan value

Those with substantial financing needs can get a LAP up to ₹15 crores. Such benefits of a Loan Against Property work well for large business owners or individuals looking to finance high-value projects. Whether you need funds for business expansion, purchasing a new property, or any other significant expenditure, IDFC FIRST Bank can help you accommodate your needs.

●  Extended tenure

IDFC FIRST Bank offers a repayment tenure of up to twenty-five years, which allows you to save up to twenty per cent on your EMIs.

●   Balance transfer and top-up facility

If you already have a mortgage loan with another lender, IDFC FIRST Bank offers the option to transfer your existing loan and enjoy lower interest rates on a loan against your property. Additionally, you can opt for a top-up facility to access additional funds without the hassle of taking out a new loan. This feature adds an extra layer of convenience and flexibility.

●   Funding for all types of property

LAPs are not limited to residential properties. They extend to commercial, industrial, and even specialised properties like schools, hospitals, and restaurants. This wide range of acceptable collateral with IDFC FIRST Bank makes them a versatile financing solution.

●   Loan against rental income

IDFC FIRST Bank also offers the option to avail a Loan Against Property on rental income, known as lease rental discounting (LRD). This option is ideal for leveraging your rental income and getting additional funding for various financial needs.

●   Dropline overdraft facility

If you require more flexibility, IDFC FIRST Bank proposes a dropline overdraft facility. This option allows you to access funds as needed, with interest charged only on the amount utilised. The withdrawal limit is reduced monthly, and you can deposit funds back anytime to lower the outstanding balance.

The bottom line
 

LAP can be a valuable financing option, particularly through IDFC FIRST Bank. With competitive interest rates, longer repayment tenures, and a convenient application process, a Loan Against Property can be a smart choice for your borrowing needs. Moreover, it offers a flexible, cost-effective solution for considerable financing. By borrowing against your property, you can make the most of the LAP advantages and meet your financial goals without compromising security.