Property investment is one of the best things since this asset can help you at any phase of time in your life. Also, the property can help you start your own enterprise in just a few simple steps, which you can avail of through a conventional loan against property for the business scheme.
A loan against the property is a secure loan that many banks, Non-banking Financial Institutes (NBFC’s), private lenders, etc., provide at nominal interest rates. Generally, these loans are available at a lower interest rate and long tenure. The loans are sanctioned for a generous amount if you choose your residential property as collateral.
Eligibility for loans against property:
Certainly, there are some eligibility benchmarks for all candidates willing to avail of a loan against property set by lenders.
- The property should be situated in India.
- The applicant must be of a minimum of 18 years of age and a maximum of 65 years.
- You can easily avail loan against property for your enterprise.
- Your previous employment can be any type. I.e., Salaried or Self-Employed.
- Your net monthly income should be a minimum of Rs. 25,000/-
Documents required to avail loan against property:
Identity proof is the first and foremost requirement of any loan approval, whether a personal loan or loan against residential property. Identity proof includes documents like Aadhaar Card, PAN card, Passport, Driving License, Voter Identity Card, etc.
Address Proof is the second most vital requirement in any business. It may include the following documents like Aadhaar Card, PAN card, Passport, Driving License, Latest Electricity Bill, Water bill, etc. Basically, any document has a permanent address verified on it.
Specific documents requirement:
For any Salaried person:
- Salary slips for the last 6 months.
- Form 16.
- Last 6 months bank statement.
- Offer letter or certificate on letterhead of the company stating person to be an employee of that company.
- Audited financial sheet, certificate of practice, qualification certificate
For Businessman’s/ Self Employed:
- Past 3 years income tax statement.
- 6-month bank details.
- TDS Certificate
- Any other relevant document is required from the lender.
- Shop Act License, Sales Tax Certificate, and all other relevant documents as per business entity.
Points lender consider while approving loan against property for business:
E.1) Repayment terms:
The repayment terms are absolutely essential, and they should be transparent. Generally, the payment term for these types of loans is 12 months and up to 20 years. All this varies with the understanding between borrower and lender.
E.2) Property valuation:
It is another most essential point the lender should check before giving business loans against the residential property. The lender must generally verify property documents and cater to the Fair market value of the residential property. Hence, they offer a loan scheme up to 50-60% of the fair market value of that particular property.
The applicant must pre-decide the tenure and way of payment by discussing with the loan executive whether they want to debit the EMI value through a card or other methods.
E.4) Repayment Capacity:
Every applicant holds a different capacity to repay the generated loan amount. While collateral is just security, lenders always give priority to the credibility of repayment of every individual. Most interestingly, it can include CIBIL score, past loans payments schedule, etc.
So, these are some of the factors that a lender should verify before giving business loans. Let’s focus on some relative points that every applicant should consider while getting business loans.
Points applicant should consider while getting a business loan against property:
F.1) Interest rate:
Interest rate is a very vital factor in every loan matter. Therefore, every borrower must check what interest rates are their lenders charging. The rate of interest should be very reasonable. And if not, then the borrower must verify the rates from other lenders, as well.
F.2) Loan amount:
Generally, the loan against residential property amount is decided after evaluating the property value. The big is the value – the more is the loan amount will be.
F.3) Processing fee and other charges:
Another vital factor every borrower should consider before taking any business loan is the hidden charges. It often can be disturbing as well.
F.4) No Tax benefit:
Unlike other loans, you can avail of tax benefits from business loans against residential property.
Getting a loan against property for business can be a great decision. It will help you overcome your urgent need for money even without selling your asset. Once you establish your effort, you can smoothly pay back the loan and get your property papers back.
This scheme also comes with two benefits – first, you get finance for your establishment and second, you can save your property. This scheme will further help you reach the heights of success.