When to take a loan against property?
A loan against property can be taken for various reasons, including plans to expand business, plans for a trip abroad or marriage of a son or daughter. While there are loans like gold loans that could also serve as a hypothecated asset, Indians hardly prefer selling their gold, due to emotional attachment, which is why one could prefer a loan against property.
Also, loan against property is much cheaper when compared to personal or other loans, which is why it is more preferable.
How much loan can you be granted?
Now, this question has no straightforward answer in a sense that each bank may value the property at a different rate. But, largely one can expect around 50-60 per cent of the asset value to be sanctioned as loan. So, if your property is valued at Rs 1 crore, you could get a loan of up to Rs 50-60 lakhs. In case the asset value has increased over a period of time after taking the initial loan, there could be a possibility of increasing the loan amount.
It's important to remember just like a home loan, a loan against property also has processing charges. So, make sure to take only an amount that you need.
A lot of advantages
It's easier to get a loan against property, then a host of other loans. Also, interest rates are far more attractive than other forms of loans, like personal loans. Also, the property continues to be in the name of the owner and the asset can be put to a more productive use.
Loans against property is yet to catch up in India, but it's something that can certainly be considered.