Owning a commercial property is a privilege and you can make the most of it by availing funds against the same. If you own a commercial property, whether it is in use or leased, you can apply for a loan using the property. Known as loan against commercial property, the secured loan has high amount and quick approval. Your property will be used as a collateral and the loan will be processed. It is a secure term loan where the property works as a guarantee to the lender. You can apply for the loan for the purpose of education of your child, for business, for marriage or for any other personal reasons. When it comes to the lenders, it is a no loss deal for them and they are willing to lend money against an asset. The risk is minimal and there is less or no chances of losing the amount lent to you. Here is everything you need to know about the loan.
Purpose of the loan
A secured loan is the best way to get funds when you need to cover high expenses. Most people use a secured loan for business purpose, education, wedding, medical emergencies, vacation, purchase of a new property or to start a new venture. You can use the funds for any purpose you wish to. There are no restrictions on the end use and the lender will not ask you to provide details about the purpose of purchase.
Most borrowers are concerned about the loan amount they can receive against the property. In the given case, the value of your property plays a crucial role in fixing the loan amount. The lender will sanction a loan of about 70% of the value of the property. Hence, you need to be aware of the market value of your property. When you make an application for the loan, the lender will hire a market valuer to estimate the value. Your loan amount will be based on the same. Apart from the market value, the lender will also consider other aspects like your income, credit score, stability of the business and your repayment history.
Scout the market for reliable lenders in the industry and then choose one. You will have to check the eligibility criteria and interest rates before making an application. If you are eligible, make an online application with the lender. All you have to do is fill the application form and submit relevant documents. Once done, the loan will be processed in 10 to 15 working days and you will receive funds in your account. After the repayment of the loan, the property will be transferred back to you.
In order to apply for the loan, you need to provide an identity proof, address proof, income proof, educational qualification, business documents and documents of the ownership of your property. You will also have to provide bank statements for the last six months and your ITR return. If there are co-owners of the property, they will become co-applicants for the loan and you will have to provide their documents as well.
Rate of interest
The interest rate on a secured loan is significantly low due to the lower risk associated with it. Hence, you can get a loan at an interest rate ranging between 12% to 16%. Every lender offers a different interest rate. You need to compare the same before making a decision. You can compare the interest rates online and then choose a lender. A low interest rate means low EMI and low outflows.
The tenure of a secured loan can be as high as 15 years. Prepare a repayment schedule to ensure that the loan is repaid over the tenure. If you have excess funds on hand, you can make a prepayment and close the loan before time. However, enquire about the prepayment fees with the lender before you make a decision.
The loan will have to be repaid in EMIs over the tenure. Timely repayment of dues is of crucial importance. Since the asset is hypothecated with the lender, default in loan payment will give a right to the lender to gain possession of your property. The lender can auction the property to recover outstanding dues. Hence, if you do not make regular and timely payment of dues, you could end up losing the property.
Use an EMI calculator to get a quick EMI estimate. The calculator is available online and is free to use. All you need to do is provide the loan amount and tenure. You will get the result in no time. You can change the inputs until you reach an optimal output. Consider the EMI and then decide if you will be able to make the repayment or not. If not, ask for a longer tenure so that the EMI amount is reduced. Be practical when making the decision. Do not agree on a higher EMI amount only to repay the loan because it could put you in trouble at a later stage.
Considering all the elements of loan against commercial property in mind, it is a good option to raise money for financing a huge expense. The loan has a long tenure and low interest rate, making it an ideal choice for you. The only drawback is that the inability of loan repayment could lead the lender taking possession of the property. However, if you plan your finances well, you can ensure timely repayment of dues and get your property back in no time. You need to identify the purpose of borrowing and the amount of funds you need. This will help make an efficient loan application and repay the same in due time. Some lenders offer a tenure as high as 30 years. Hence, the EMI amount will be significantly low and will be easily manageable for you. Loan against property is one of the most efficient form of borrowing today.