Getting loan against property more cost-effective

Even if you are a meticulous saver, there may be times when your finances are strained and you need a little help to tide you over. Though borrowing from family or friends is a preferred option for many, if the amount you need is large, it may not be a good idea to stress their finances as well. A better option would be to leverage an asset you own—your house.

You can use your house as collateral to take a loan from a bank. The latter will exercise due diligence as far as the property is concerned, appraise its value, and offer you up to 70% of its value as loan. Since this is a secured loan (you are offering a collateral), you can get a higher amount than the one you will get for an unsecured loan like a personal loan. Of course, you will also have to pay the administrative and processing fee, which is usually 0.5-1.5% of the value of the loan. Typically, the tenure for such a loan is 1-9 years, but some banks may be willing to extend it to 15 years if the loan is large. The interest rate, which can be floating or fixed, varies from 12-16%, which makes them cheaper than personal loans.

"Taking a loan against your property is certainly cheaper than a personal loan, where the interest rate is usually between 14% and 22%. The only loan that is less expensive than the one against a property is a home loan," says Rajiv Raj, director of CreditVidya.

How to get a loan against your property

If the property you are taking a loan against has more than one owner, all of them will have to be joint applicants to avail of the loan. You can get a loan against any type of freehold property, from a house to a plot of land. It also doesn't matter whether you live in that house or have given it on rent. "The most important criterion is that the title of the property should be clear and there shouldn't be any encumbrances," says Pankaaj Maalde, head, financial planning at Apnapaisa.com.

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MCHI-THANE has always been very clear that fine housing complexes and shopping malls cannot stand in isolation. A great City is the sum total of great buildings, great infrastructure and great people. MCHI has been committed to growth of the real estate sector and is credited with the harmonious growth and rise in quality and standards of construction in Thane City in the past decade.

Its aim as an Association of Developers has been to seek rational rules and regulations which are uniformly applied across the board as this will to a great extent result in speedy construction, cost reduction, fair pricing and a push for better quality standards at par with the developed world, with a high level of transparency.