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Personal Loans for Debt Consolidation: Everything You Need to Know

You can combine two or more unsecured or secured debts into a fresh personal loan through debt consolidation. This facility lets you avoid tracking and paying EMIs for all your existing loans separately. In fact, by paying a single instalment towards the new personal loan, you will be able to meet all your debt liabilities.

Keep reading to know about how you can benefit from personal loan debt consolidation.



Features and Benefits of Personal Loan for Debt Consolidation:


The features and benefits are as follows:


Collateral-free: You do not need to mortgage any property to obtain a fresh personal loan for consolidating existing debts.


Repayment Flexibility: You can choose the loan repayment time between 1 to 5 years, considering your repayment potential.


On-time Approval: The seamless online application and lenient documentation procedures let you get approval on this credit facility without much delay.


Instant Disbursal: The loan amount is disbursed without delay after you get approval.


Prepayment Option Available: Several financial institutions offer loan prepayment facilities. It helps you eliminate the debt obligation before time, saving much of your interest outgo.


Online Application Facility: You can easily apply for this loan online from the comfort of your home.


Advantages of Choosing Personal Loan for Debt Consolidation:


The advantages of choosing a personal loan for debt consolidation are as follows:

Lower Interest Rate: Business loans and debts obtained from credit cards come at a higher rate than a personal loan. By combining them into a personal loan, you can reduce the applicable interest and save much of your overall borrowing costs.


Single EMI for All Loans: You do not need to pay EMIs separately for all the loans. Instead, you can pay only a single EMI, which is easy to keep track of and manage.


Single Loan Repayment Tenure: Single loan repayment tenure makes it easy to plan the repayment and close all the loans together.


Factors to Consider Before Opting for a Personal Loan for Debt Consolidation:


You must consider the following factors before applying for debt consolidation:


Check Your Credit Score


Credit score leaves a prominent impact on the interest rate charged by a debt consolidating financial company. So, you need to make an effort to opt for debt consolidation when you have a healthy credit score. If your CIBIL score is below 750, you need to inform all your income sources to financial institutions. Alternatively, you can apply with a co-borrower with a CIBIL score above 750. These will help you get the debt consolidation facility easily.


Consider Repayment Tenure of Existing Debt


Before opting for debt consolidation, check the repayment tenure of the existing loans. If the tenure of a present debt is about to end and you feel that you can repay your loan on time, there is no need to go for debt consolidation.


Go Through Eligibility Criteria Set by Financial Institutions


Eligibility criteria vary considerably from one lender to another. So it is a must to check if you fulfil all the eligibility standards they have set to qualify for debt consolidation.


Compare Interest Rate and Additional Charges


Before deciding on a financial institution for debt consolidation, you need to compare interest rates offered by different financial institutions. At the same time, you must also consider the additional charges lenders levy, such as processing fees, stamp duty, etc. This will help you minimize your borrowing cost.


Loan repayment Tenure after Debt Consolidation


You also need to ensure that financial institutions offer enough time to repay your consolidating personal loan. In a shorter tenure, the instalment amount will be higher, making it stressful for you to repay. You can use a personal loan calculator to know whether the repayment period gives you a manageable EMI. Only by mentioning the interest rate, loan amount and tenure you can determine the EMIs.


Personal Loan for Debt consolidation v/s Balance Transfer


Choosing between debt consolidation and balance transfer is a tough task when it comes to making a solution for loan repayment. Both have their advantages and are effective for different scenarios. You can go for a balance transfer when you have taken a single loan at a higher interest rate.


On the other hand, if you have applied for multiple loans, you can go for debt consolidation, so that you can make single EMI payment. It will become easier to track repayment status. Hence, it would be best to choose the most appropriate option after ensuring that it benefits you the most.


Now that you have a complete idea of the benefits of a personal loan for debt consolidation, you must evaluate your situation and apply for the financial facility if needed. However, before opting for it, compare the interest rates and loan tenure offered by different financial institutions to get the best deals.


Source: Goodreturns

Things to know before taking loan against Mutual Funds

You have mostly come across borrowing loans against the land, gold, or a house. But, if you’ve put your money in a mutual fund investment, can you take a loan against it?


Let’s find out.


An overdraft against mutual funds, could it be? There are always emergencies right be it Small or big? It can happen. There can be a time in those situations that you can fall short of money in a short-term aspect. Investing in funds is known to be liquid, but not all of the funds have high liquidity. Sometimes you would not be ready to redeem your fund as it would interrupt your financial goal, and liquidating it can be out of the picture. So a loan against this find could be an opportunity to keep the find and still be supplied the finance, right?


Let me also make it clear that not all banks would accept mutual fund investment from fund houses.


Pointers to Loans Against Mutual Funds


– You Can Avail Loans to Only a Certain Limit of your Mutual Fund Holding


The amount of loan you may acquire against your mutual fund  holdings is primarily determined by the sort of mutual fund scheme in which you have invested and the financial institution from which you will borrow.


– The Loan you Can Get Has an Upper Limit


Loans against mutual funds, like any other form of loan, have specific restrictions. Many banks have a maximum and minimum loan amount that you can get.


– You won’t Get these Loans From All the Banks


Many banks only lend money against a certain set of mutual fund plans that they have chosen.


– It will Cost you Less for a Loan Against Mutual Funds than Personal Loans or Credit Cards


A significant advantage of a loan against mutual funds is that the interest rate is lower than that of credit cards or personal loans. This is due to the fact that loans against mutual funds are secured, that is, they are guaranteed by collateral.


– You Will Still Continue to Earn Returns on your Pledged Mutual Funds


When you pledge your mutual fund units to secure a loan, those units remain invested in the market. This is due to the fact that when you pledge your mutual fund units with a bank, you grant the bank the right to sell the mutual fund units only if you default. However, as long as you do not default, your assets remain market-linked, and you continue to receive profits on them.


What are the Advantages of Taking a Loan Against Mutual Funds?

1. You Get a Lower Interest Rate: Loans against mutual funds often have lower interest rates than personal loans. Because it is a secured loan, the interest rate is lower than that of unsecured loans.

2. You Do Not Need to Redeem your Mutual Fund : Investors are not required to redeem the MF plan in order to get loans against it. The units are pledged as security for loans but are not sold, allowing investors to get loans while maintaining ownership. In fact, if money is tight, it is best not to sell the apartments and instead take out a loan against them.

3. Quick Money: It is useful when there is a need for rapid cash. In times of financial crisis, one can pledge fund units even online and get money into an account. Because you are already an investor, the loan application process is simplified, with minimal documentation and eligibility requirements.

4. A Source of Short Term Capital Needs: Loans against MF might be beneficial when money is needed for short-term purposes. You can raise cash from investment fund units for a short period of time and repay it gradually without jeopardizing scheme ownership.

5. Pay Interest for the Used Loan Amount: Interest is not to be paid on the full loan amount promised from the investment plan, but only on the amount actually utilized, that is, the amount credited or overdraft from the current account.

When you want to continue your mutual funds without a hitch but the problem is you need liquid money, a loan against mutual funds interest rate, a loan against sip, or an overdraft can come in handy. This is one of the most prominent benefits of the option of availing a loan against your mutual fund.

When there is a failing market, it is better to take a loan instead of redeeming the units at a loss or so. You can take a loan, which can prove to be more beneficial. When you do this, you have not liquidated your fund, and when the market does better the price of your share will rise up again. In a bull market where all funds are profitable, it is preferable to sell the units rather than borrow. If you are in a bull period, redeem. Borrow during a down market. If you require money quickly, be sure you borrow sensibly.

Source: Groww

7 Insightful Loan Tips for Young Entrepreneurs in India

Running a business is no easy task. And, if you are starting a new venture with a completely new idea, the road to success becomes much more challenging. The only way to overcome the challenges and run the business successfully is to have adequate funding.


For new businesses and entrepreneurs, there are plenty of financing options available including business loans. Therefore, you need to research the financing option that will work best for you.


Here are the 7 useful business tips for young entrepreneurs looking for a business loan that will help you make an informed choice.


1. Determine the Purpose of Seeking a Business Loan


Before applying for an online business loan, you should have clarity on the purpose of seeking a business loan. Whether it should be utilized for funding growth, making a new acquisition, working capital requirements etc.


For example, if you are seeking funding to meet working capital needs, you can consider taking a business line of credit, which is approved immediately. You need to weigh the pros and cons of each business loan type, and whether it meets your objective and business needs.


2. Decide Loan Tenure and Repayment Amount


For any new business, it takes time to settle in the market and generate enough cash flows from business operations to sustain on its own.


Therefore, as an entrepreneur, you need to decide on the loan tenure and repayment amount accordingly. It is better to go for a flexible timeline, with repayment tenure stretching up to 5 years. It will give you enough space to focus on your business, rather than prioritizing repayments.


3. Compare and Pick the Right Lender


Always compare the different funding options available with different lenders and the type of business loan that suits your business requirements.


Also, check the lender’s background, review given by borrowers, time taken to approve the loan, and other necessary factors before finalizing the lender and business loan type.


4. Understand the Costs


In any loan type, the interest cost is greater than any other type of cost associated with the loan. Also, you cannot ignore it, as a small difference in business loan interest rate percentage can have a huge impact on the total cost of the loan over the repayment tenure.


While comparing the interest cost, instead of checking the annual rate of interest charged by the lender, you should focus on APR or Annual Percentage Rate.


APR reflects the actual yearly cost of the loan and is a more effective metric when it comes to comparing the cost of the loan. It includes the base interest rate plus all the costs (processing fee, service charges) to avail of the loan.


5. Gather all the Information and Keep Documents Handy


Before approving a business loan, the lender verifies the financials of the business, whether the business is profitable or not and can generate enough cash flows to meet all the expenses efficiently. Please note that most lenders do not provide business loans to applicants who do not have an existing business or one that does not match their business loan eligibility criteria. Thus, if you are planning to start your business from scratch for the first time, you can consider taking a personal loan (if you plan to keep working at your job on the side) or looking for alternative funding options. You can also ask a close family member with a good credit score and stable income to take a personal loan on your behalf.


If you do have an existing business and match the required criteria, please also note that before applying for a business loan, do detailed market research, a report on the viability of the business with financial projections for the next three to five years. This will help the lender to establish confidence in your business and approve the business loan. You should note, lenders refrain from financing risky businesses, which are untested in the market and have a low rate of success.


Keep all business loan documents handy including bank statements, cash flow statements, income statements, balance sheets, ITR for the past two years and legal documents like trade license, certificate of incorporation, GST certificate, etc.


6. Take Advantage of Tax Benefits


There are various government-backed loan schemes targeted towards promoting start-ups, MSMEs, SMEs, in India. For example, MUDRA loan, Stand-up India scheme, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), etc.


Such loan schemes offer many benefits to business owners and entrepreneurs, for example, tax benefits under various sections of the IT Act, interest rate concessions, and flexibility in repayments.


7. Check Your Business Loan Eligibility


Apart from the business financials, lenders also pay close attention to the creditworthiness and credit behaviour of the business owner. For example, having a credit score lower than 700 can affect your business loan eligibility. Also, having multiple loan accounts is not considered a good sign by lenders, as it indicates, you have a high dependency on credit.


Always check your business loan eligibility before applying, as any hard inquiry on your credit report can negatively impact your credit score.




Managing finances efficiently is crucial for the success of any business, whether it is a start-up or an established business house. You should weigh the pros and cons of every financial decision before implementing it.


The tips for entrepreneurs to be successful in availing a business loan in favorable terms will help you in making the right financing choices and let your business grow in scale.

Source: fullertonindia

Dos And Don’ts Before You Apply For A Personal Loan

Taking a personal loan has become one of the simplest ways to tackle cash crunches. The loan is offered at minimal eligibility criteria and can be used for several purposes making it the ideal choice for loan seekers. Be it providing financial support during an emergency or funding a purchase of an electronic item, or renovating your home, a personal loan can be availed for any of these purposes.

  • Another great advantage with a personal loan is that the loan is approved and disbursed in minutes. One can also apply for a personal loan online from the comfort of their home and get the loan disbursed within a few hours.
  • However, while applying for a personal loan, one must be aware of several factors, ignoring which can have a great impact on their finances and can also lead to future problems. For example, in the urgency of getting funds, many people ignore the interest rate factor. This impacts borrower’s future finances and can also lead to trouble if they are unable to pay the EMIs.
  • So, here are some of the dos and don’ts for getting approved for a personal loan.

  • Do’s

  • Do compare for the interest rate
  • Different lenders have different interest rate offerings for the customers and if you come across one, it is important to compare it with different lenders. Doing this will help you get the best offer at affordable pricing.
  • Figure out the loan amount that you require
  • It is important to know the exact figure of the amount you require before you apply for a personal loan. Borrow only as much as you truly need, even if you qualify for a higher sanction. This way, you don’t pay interest on a higher sum than you didn’t require.
  • Do compare for offerings with additional features and benefit
  • Before you apply for a personal loan, do your own research by comparing various loan offerings. Start by comparing the loan amount, tenure, and interest rate. Then finalize one based on the best offering and availability of additional features/offers. These can help you to reduce the cost of borrowing, or even help you get the money you need on flexible terms.
  • Do check eligibility criteria of the lenders 
  • Many people do not find it important but it is important to check for the eligibility criteria of the lenders. Doing this helps you know the lender who fits best for you as per your eligibility. So, when you apply with such lenders your chances to get approved for the loan also increases.

  • Don’ts

  • Don’t accept the first loan offer you get
  • You might have several loan offers in your message box or mail inbox. But, this doesn’t mean that you accept the first offer you see/get. Doing this is never advisable and even after you are given an offer, it is important to check for several other offers with different backs and then go with the one which suits your requirement and pocket.

  • Remember to shop around before committing to a loan.

  • Don’t take out the maximum loan possible
  • Your lender might suggest you go for a full loan amount for which you are eligible. But, we don’t recommend taking out a big loan just because you are eligible for it. Personal loans are loans with high interest rates and hence one needs to be careful before going for a particular loan amount. However, it is important to analyse your repayment capacity before you apply for a personal loan. Apply as per your requirement and repayment capability. The payment that seems manageable upon approval may be a mistake down the line if you unexpectedly lose your job or in a case where you need to spend some huge amount.

  • Do not make several loan applications at once

  • People who have an urgent need for cash sometimes apply for loans with multiple lenders at the same time. Each loan application results in a credit score check, which reduces the score marginally. These checks could hurt your CIBIL score, lowering your loan eligibility and credibility both.

  • A personal loan is a financial tool that could help to deal with several financial crises. However, keeping the above-mentioned pointers in mind when applying for a loan will save you from future problems.

Source: financebuddha

business credit score

Mistakes To Avoid For A Good Business Credit Score

  • For new business owners looking to set up their business or a medium, small and micro enterprise (MSME) wanting to explore new business opportunities for scaling up, it is necessary to know that strong creditworthiness is imperative to avail credit from formal lenders to achieve your business goals.

  • Here’s what you need to know about the common mistakes an MSME should avoid in order to stay creditworthy to avail business loans.

  • What is a Business Credit Score?

  • Your business’ credit score is calculated based on your credit behaviour over the previous 36 months. In case you have not availed any loan during this tenure, the credit bureau will not be able to assign a credit score due to dearth of data.

  • The proprietor’s credit behaviour and personal credit score, in the case of both a partnership and proprietorship, also counts when the business is assessed for lending.

  • Therefore, it is best that the business avails some loan, or the proprietor has credit card dues, and they are repaid on time, such that you can have a good score when you have to opt for a loan.

  • Whether it is to invest in new equipment, or to expand the business, or to pay off supplier credit, every business owner may have to take a loan at critical points in their business lifecycle. However, if your credit score is low, many banks and lending institutions will not approve your business loan application.

  • Your credit score would also impact the rate of interest and the structure of the loan that you will get from non-banking financial companies (NBFCs). Hence, it is imperative to understand what mistakes could impact your business’ credit score.

  • Mistakes To Avoid For A Good Business Credit Score

  • High intensity of loan build-up

  • Credit score gets impacted if a business owner takes too many loans in a short period of time. This is perceived by lenders as a sign that the customer is credit hungry. Availing too many unsecured loans may raise red flags with lenders, so it is necessary for business owners to make use of a mix of unsecured and secured loans.

  • Guaranteeing a third-party loan

  • If a business owner stands guarantor to a loan availed by a third party and that third party defaults, the business owner’s/ guarantor’s credit score could be impacted even though he is not directly paying that loan.

  • By acting as a guarantor, you agree to be responsible for the repayment of the loan. In the first place, avoid giving such guarantees. If you must, you should be very cautious at the time of giving the guarantee, as someone else’s behaviour could impact your score. And if you have done so, nudge the person to adhere to the repayment timelines.

  • Not monitoring and updating the credit report

  • Another common mistake which people make is ignoring disputed amounts in the credit report. For instance, if no action is taken on incorrect dues, the amount would start to accumulate and draw interest. This would then balloon into a large sum and reflect in your outstanding credit. Do not ignore any disputed amount and follow up till it is fully resolved.

  • A business owner must also monitor his business’ credit profiles on a regular basis and not just once, viz. monthly, or quarterly. Going through the credit report is a must to understand the reasons for the low score.

  • If there are any irregularities that may be reflected in the credit score, it is even more important to raise the dispute on time as improving a low score takes time. Some examples of such irregularities are that a loan may be mistakenly attributed to the business that the business has not taken, or a loan that has been paid off completely may not be shown as “closed” by the lender.

  • Applying for loans from multiple lenders

  • When applying for a business loan, applying to too many lenders at once does not actually work in your favour. It is important that you apply only where you’re fairly confident that your application will get approved. It is also wise to restrict your loan application to only a couple of lenders when enquiring within a short period.

  • If you are working with a direct selling agent or a referral agent, while handing over your loan application to them, clearly communicate and ensure that they send your loan application only to a certain number of lenders. Be cognizant of too many loan enquiries; every enquiry on your credit report is noted and too many of them will bring down the credit score.

  • Restructuring of a loan

  • When businesses opt for loan restructuring, the same is shown as ‘restructured’ in their credit report as well. Banks and NBFCs are cautious of lending to such MSMEs. Any relaxation or waiver of terms of loans raises red flags with lenders that the MSME is incapable of repayment.

  • Bottom Line

  • Good credit report based on a business’ timely repayment and responsible financial behaviour indicates to lenders that the business is a creditworthy borrower. Lenders provide pre-approved loans to such customers, and a higher quantum of loan at that, without asking any questions. The loan process becomes smoother. Is there any downside, one may ask? Not at all. So, follow these tips and strengthen your business credit score before you avail your next loan.

Source: Forbes

Loan Against Security | Deeva Ventures Pvt Ltd

Loan Against Security

 One cannot predict when monetary crises may arise and it is advised to invest in different types of financial portfolios. There are numerous avenues from where one can raise capital and its selection has to be based on need and urgency. 

Here is an option to avail quick loan that requires less processing time and offers faster dispersal of capital.

In a scenario, where the requirement is of small capital and on an immediate basis, one can avail quick loans against shares, debentures, and bonds. 

A number of banks and NBFCs grant advances against the security of shares, debentures, or bonds to individuals subject to the fulfillment of prescribed conditions.

Loans against shares and debentures can be given to individuals:

  • For meeting contingencies and needs of personal nature.

  • For subscribing to rights or new issue of shares/debentures against the security of existing shares/debentures.

Loan Amount Offered:

The loan amount against the security of shares, debentures, and bonds does not exceed the limit of Rs 10 lakh per individual if the securities are held in physical form. 

However, an individual can avail of a loan of up to Rs 20 lakh if the securities are held in dematerialized/ Demat form.

For subscribing to IPOs, loans given to individuals do not exceed Rs 10 lakh. 

Banks may extend finance to employees for purchasing shares of their own companies under ESOP to the extent of 90% of the purchase price of the shares or Rs 20 lakh, whichever is lower.

Bank’s Loan Policy:

Banks maintain a minimum margin of 50% of the market value of equity shares/ convertible debentures held in physical form. In the case of shares/ convertible debentures held in dematerialized form, a minimum margin of 25% is maintained.

The aforementioned are minimum margin stipulations and there is a possibility that banks may stipulate higher margins for shares whether held in physical form or dematerialized form. 

In addition, the margin requirements for advances against preference shares / non-convertible debentures and bonds are determined by the banks themselves.

As per RBI guidelines, each bank formulates the approval of their Board of Directors regarding Loan Policy for grant of advances to individuals against shares/debentures/bonds. 

Banks obtain a declaration from the borrower indicating the extent of loans availed of by him/her from other banks as input for credit evaluation.

Banks avail the facility of Pledge of the dematerialized 

shares/debentures in the depository system, whereby the securities pledged by the borrower get blocked in favor of the lending bank. 

The loan limit depends on the valuation of the security, applicable margin, and ability to service and repay the loan. 

A loan is normally given in the form of an overdraft facility against the pledge of the securities. Interest has to be paid for the amount and period for which the overdraft facility is utilized.

Furthermore, a declaration is obtained from the borrower indicating the details of the loans/advances availed against shares and other securities, from any other bank, in order to ensure compliance with the ceilings prescribed for the purpose.

Advantages Of Loan Against Securities:

  • Ideal for short-term funding.

  • Enables instant liquidity against shares without selling them.

  • Takes care of all investment as well as personal needs.

  • The tenure of the loan against security is one year, but it can be easily renewed.

  • The rate of interest ranges from 12 – 15%. The rate varies from bank to bank.

  • The processing fee is charged at ~2% of the loan amount.

  • The loan amount depends on the security the borrower is offering.

  • The no charges for prepayment of the loan.

  • The loan has to be repaid within the fixed period. If the borrower fails to make the payment, the lender can file a case for recovery and the balance amount has to be repaid within 3 years from the date of sanction of the loan.

Who Cannot Avail It?

  • To Trusts and Endowments against the security of shares and debentures.

  • For speculative purposes, inter-corporate investments and acquiring a controlling interest in companies.

  • Against the equity shares of the banking company to its directors.

Banks will not extend advances to their employees/ Employee Trusts set up by them for the purpose of purchasing the banks’ own shares under ESOP/ IPO or from the secondary market.

This prohibition will apply irrespective of whether the advances are unsecured or secured.

Easy Loans Against Mutual Fund | Deeva Ventures Pvt Ltd

Easy Loans Against Mutual Fund

A loan against security is sanctioned against a pledge of security such as mutual funds, insurance, etc.

The list of approved securities for LAS loans varied across lenders. Typically, a loan against securities is approved for the following:

  • 1. Mutual fund (Debt, Equity & Hybrid)
  • 2. National Savings Certificate (NSC)
  • 3. Demat shares
  • 4. Bonds

If you’ve pledged shares, you continue to enjoy ownership benefits – rights, bonuses, etc.

In turn, you get an overdraft facility with a limit based on the value of the securities pledged.

You are then free to choose how and when to use the LAS loan funds. The loan against security interest rate is determined only on the amount withdrawn for the period of the loan and is typically lower than that on a personal loan.

The biggest advantage of such a loan is that you can get access to funds quickly whenever you need them without giving up your shareholder rights to dividends and bonuses.

Thus, a loan against security is a good way to meet short-term financial needs.

Eligibility Criteria

Loan against securities eligibility criteria varies depending on the lender. LAS loans are available to both salaried employees and self-employed individuals. 

You must be within the age group of 18-65 years to avail of a loan.

LAS loans are also available to organizations holding eligible securities that have been in existence for at least 2 years.

We accept the following securities for a loan –

  • 1. Equity/Demat Shares
  • 2. Non-Convertible Debentures
  • 3. Mutual Fund Units
  • 4. Bonds and Government Schemes

Keep the following documents ready when applying for a loan against securities–

  • 1. Photo Identity Proof
  • 2. Income Proof
  • 3. Address Proof
  • 4. Salary Slips
  • 5. Bank Statements
  • 6. Passport Size Photo

Important Features to Know

A loan against securities is a secured loan since the bonds or shares are pledged as collateral.

Typically, the tenure is one year, which you can renew if need be. The loan amount will depend on the type of security you offer.

If you wish to prepay your LAS loan, you can do so without any prepayment charges. 

Do note that mutual funds exempt from capital gains tax (under Sections 54EA/EB) are not accepted as collateral.

How to Apply

We understand how much you value your investments. With our easy loans against securities, we help you meet both short and long-term financial goals while retaining the ownership of your securities.

We also offer you the flexibility to swap securities based on your assessment of the markets!

Our application process is fairly simple and quick – select your loan amount and tenure, submit your application, and get funds in your account. Visit us today to understand our loan against securities eligibility.

Loan Against Property LAP

Before Applying for Loan Against Property (LAP)

Financial setbacks are like uninvited guests – they always turn up unannounced at the wrong time and derail your plans. A lot of us imagine this scenario in our heads and create hypothetical funds or options that we are sure will help us in case of such an eventuality. 

Many of us might not have that fund ready and need to fall back on options that are always not so pleasant – like taking a loan from a relative or a friend. 

So how do you arrange for money at these times of crisis? Let’s take a look at one of our recommended options- the loan against property.

We are all aware of the high interest of personal loans but often we find ourselves out of choices. This is where a loan against property (LAP) becomes a viable option. 

Also known as Mortgage Loan, LAP is categorized as a secured loan and disbursed against the security/guarantee of the borrower’s legally owned property. 

Although loans against property are not at par with housing loans as far as competitive interest rates are concerned, they are definitely cheaper than personal loans.

In case of loan against property, lenders have conditional ownership over the borrower’s property until the loan is repaid in full. 

Therefore, the borrower can obtain a loan amount commensurate to the value of the property less than the lender’s margin. Additionally, these loans offer larger sums at lower interest rates and longer repayment tenures. 

The borrower still remains the lawful property owner throughout the loan tenure and can choose to repay the loan at a pace in line with his/her financial standing and situation.

Further, unlike home loans, loans against property can be used as the borrower’s wishes. With constantly escalating real estate values, this loan helps raise big sums, while they are also suitable for short-term needs like medical treatment/emergencies, children’s education/marriage, starting/expanding business, etc.

If you are considering taking a loan against property, here are some important things you must know:

Property evaluation
Loan against property can be taken against a self-occupied property or a residential property that has been rented out, as long as the borrower is the lawful owner. 

Real estate that qualifies for a LAP includes a house, a commercial property, or a piece of land. Further, if a property is owned by more than one person, all legal owners need to jointly apply for the loan against the co-owned property.

On receiving an application for a LAP, the lending institution sends an appraiser to evaluate the plot or home’s market value. Non-banking financial companies and banks typically sanction only a specific percentage of the property’s total market value, usually 40-60%. 

Before quoting a final figure, financiers also take into account the property’s age and overall condition. 

To ensure that the loan is approved, it is advisable to ascertain that the property is free from previous liens and is completely owned by the applicant(s).

Loan-to-value (LTV) ratio
To secure a good deal, it is imperative to compare various lending institutions in terms of the loan-to-value (LTV) ratio offered by them. Private sector banks may offer up to 75% of the property’s value as a loan, while public banks offer up to 65%. 

This variation is attributable to the way in which the property is evaluated by financial institutions or their internal rules, and this restricts the offered LTV.

Further, if the borrower pledges his/her commercial property as collateral, the LTV offered is usually lower than in the case of a residential property. 

This is because banks opine that borrowers are more dedicated to saving their residential property rather than commercial, and this naturally lowers the bank’s perceived risk.

LAP Eligibility criteria
Though this may vary from bank to bank, some common factors that all banks consider are the borrower’s income, debts, savings, repayment track record (for credit cards, previous loans, etc.); and the market value of the mortgaged property. 

Apart from this, the borrower’s employment status, age, financial standing, and credit score also play a key role in determining the loan amount that is sanctioned. 

Lenders prefer that the borrower is paying off the debt while still employed – this is precisely why the maximum age for the maturity of LAP for a salaried individual is set at 60 years (retirement age in India) and for self-employed individuals, it is 70 years.

Interest rates, Tenure, EMIs
The interest rate on a LAP ranges from 9-15% per annum depending on the lender. The tenure of a loan against property can be between 7-15 years. 

The borrower can choose between a lump sum and an overdraft facility. Financial institutions usually have an online LAP eligibility calculator, using which you can calculate the exact EMI amount based on your loan repayment schedule.

Documents required
The key documents required by most banks/financial institutions offering loans against property are usually the same, however, there may be some minor variations from one lender to another. Common documents are mentioned below
1. KYC documents of the borrower
2. Income proof of the borrower
3. Legal documents of the property

Did you know?
Loan against property (LAP) provides no tax benefit to the borrower and the liability of interest payment starts as soon as the loan is disbursed. 

Moreover, loan against property requires quite a few checks to be made by the lender, therefore, the processing time is almost as long as in the case of a home loan.

A loan against property is one of the best ways to raise money especially when the property market is bullish. However, if the borrower is unable to pay off the loan on time in full, the financial institution is authorized to take possession of the mortgaged property and auction it off to recover the loan owed. 

Like any other loan, repayment defaults also negatively impact the borrower’s credit/CIBIL score, not to mention the penalty that will be charged on loan repayment. It is therefore prudent to thoroughly assess one’s repaying capabilities and understand all associated conditions before opting for a loan against property.