Misconceptions about Loan against Property


Loan against property is one of the most convenient financial instruments to look for, where an individual can avail better loan amount at flexible terms and comparatively lower interest rates. However, there are certain misconceptions or myths linked to the loan against property.

1. Don’t pledge house or residential property as collateral

Well, many believe that pledging a home as collateral carries certain risk, which is not true if you’re consistent with loan repayment and holds a good credit record. In fact, pledging the house could help you crack a better deal at negotiable interest rates and other terms.

2. Loan quantum is based on property’s market value

Getting the property’s market value is a sure thing in the process of evaluating the loan quantum, but that doesn’t mean the process solely depends on the property’s value. Apart from it, the lender also checks for the applicant’s credit score, repayment history, age of the property, current condition of the property, income, and debt-to-income ratio. Based on a number of factors, the lender assigns a value to the pledged property and then you can choose a loan amount from the given range you wish to apply for.

3. You need to have high income or revenue

Although the lender definitely looks up for the applicant’s income, but there is no specific term to fall into the higher income bracket. The lender just wants to rest assure of timely repayments and only grants the loan according to the applicant’s income and repayment capacity. Hence, the lender checks for how well you’re financially organized, instead of checking the income bracket.

4. The bank takes the ownership

There are few who confuse themselves believing that the pledged property’s ownership is shifted to the bank, as in case of gold loan. But, hold on guys, there’s a huge difference between gold loan and loan against property and the ownership remains with the borrower itself. In addition, you can continue the usage of your collateralised property. Hence, the lender has no legal rights to the property, except in case of default by the borrower.

Now, as the myths and misconceptions are cleared and addressed with required information, get yourself prepared to attain the benefits associated with the loan against property.