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Yes, a loan against property is a good idea if you are in urgent need of money for a financial emergency.
Loan against property comes with its own set of advantages and disadvantages.
Loan Against Property Advantages:
1 Low interest rates –Interest rates for a loan against property begin at just 8.50% and can increase based on factors like value of the property, loan amount and ability to repay the loan.
2 Minimal documentation – There is very minimal documentation needed for a loan against property. Apart from one’s ID proof and address proof, only the documents for the property must be turned in to the lender.
3 No income proof needed – As a loan against property is a secured loan, most lenders do not check for income proof. This is a very big benefit for unemployed individuals who are in urgent need for funds.
4 Credit score not needed – Most lenders do not check one’s credit score and credit history as it is a secured loan. So, if one has a bad credit score or is new to credit, a loan against property is very beneficial.
5 Safety of property – The property is temporarily kept under the name of the lender and will be given back to the customer once the loan is repaid in full. All the ownership names are transferred back to the customer without any setbacks.
Loan Against Property Disadvantages:
1 Property can get sold – In case one defaults on payments or cannot repay the loan in full, the lender has the rights to sell the property to settle the loan amount. This can be a big loss for the customer.
2 Property value – Only 60% to 70% of the property’s market value is given to the customer as the loan amount for the loan against property.
3 Volatile prices – Since the economy is constantly fluctuating, the price of the property can rise or dip at any time. This can prove as an uncertainty to the customer as he might get a lesser loan amount than what he requires.