All Purpose Loan - Loan Against Property

Loan against property is an all purpose loan. A loan can be taken for any purpose in the time of financial emergency.  There is personal loan but it is tagged with a high interest rate along with short loan repayment tenure. Therefore many people are not able to take personal loan. If you own a house you can take loan against and it turns out to be cheaper than a personal loan. The reason behind this is the lender has the mortgaged property as security with it therefore there is no tension of defaulter of loan amount. While in the personal loan there are no such security norms.

The loan against property has a long repayment period, generally 10 years. The loan can be taken for any financial requirement whether it is for funding of the existing business in case of debt consolidation, any emergency, education, marriage or other constraints. In case of personal loan you have to specify the reason for taking loan but in this loan there is no such rule but if your loan amount is Rs 25.00 lacs and above then you have to specify the purpose of the loan.

For instance the country's largest public sector bank SBI has a clause that the loan can be taken for any purpose what so ever. In case the amount of loan is Rs 25.00 lacs and above then purpose of loan will have to be specified along with an undertaking that loan will not be used for any provisional purpose whatever including speculation on real estate and equity shares.

Some of the banks give the loan against both types of properties whether residential or commercial but some of them give loan against only the residential property. The loan amount can range from Rs 10 lakhs to Rs 3 crores, though the amount varies from lender to lender.

Some of the banks offer special schemes along with this loan like free personal accident insurance cover.

To get this loan you must be above 21 years of age and the maximum is 60 years, whether salaried of self-employed. For instance the largest public sector bank the State Bank of India has the following eligibility criteria - an individual who is: an employee or a professional, self-employed or an income tax assesse or engaged in agricultural and allied activities. Bank has fixed the maximum age limit to 60 years.

Though, some banks have fixed the maximum age limit for self-employed individuals to 65 years. The salaried applicants should be employed continuously for at least three years.

Documentation

Documents required for applying for loan are:

Proof of identity (passport, driving license etc).

Proof of residence address (passport, electricity bill etc), and proof of age (birth certificate, school leaving certificate, passport etc).

Salaried individuals must submit their latest acknowledged IT returns or bank statements for the last three months.

Self-employed individuals can submit computation of income for the last two years certified by a charted accountant.

In this loan there is a facility of an overdraft. Some banks offer this facility. The big advantage of taking this loan using the overdraft option is that the borrower has to pay the interest only on the money withdrawn, till the time loan is repaid.

While in the normal course the interest is paid on the entire amount throughout the tenure of the loan.

Before finalizing a bank check for the fees and penalties. Banks charge processing fees - is the amount charged by banks to cover the cost of processing your loan. The amount range varies from bank to bank. The fee amount is generally between 0.25 to 2%. The foreclosing of the loan before the actual tenure carries prepayment penalty.

Some banks charge this as a percentage of the outstanding principal of the loan amount. Therefore study all the features and terms and conditions carefully.

Article Source: http://blogs.rediff.com/loanagainstpropertyindia/2016/08/17/all-purpose-loan-loan-against-property/

Terms and Conditions While Adding Co-applicants in a Home Loan

While applying for the home loan, you always have the option of adding another borrower or a co-applicant or a joint applicant. A co-applicant is a person who applies for a loan along with the main borrower.

Below are some of the points to take care while adding a co-applicant:-

1. Spouses (husband and wife)

It is very common to have spouses as co-applicants in a home loan calculator and this helps in many ways. In case both are earning, their combined income can be used for calculating eligibility. Secondly, both can claim tax benefits in proportion of the EMI they pay and increase their combined tax benefit.

2. Siblings:

Two brothers can be joint applicants in a loan for the same property if they stay together. However, typically a brother and a married sister cannot be co-applicants in a home loan in most banks.

3. Father and Son:

Father and son can be co-applicants in a Loan against Home with each other even if the property is owned by only one of them.  Incomes of both father and son can be considered for determining eligibility. However, in this case, loan tenure may have to be restricted based upon the father’s age.

4. Business Partners:

Two or more people unrelated by blood but partners in the same business entity (or controlling shareholders and directors in the same company) can act as co-applicants with each other for a loan. 

The income of the partnership or company they jointly own can be added to their individual incomes to arrive at eligibility. This is however subject to the condition that they co-own the property.

Note that distant relatives, friends and unrelated persons or entities cannot be added as co-applicants. 

Documentation for co-applicant:

A joint applicant or a co applicant is equally liable for the loan as the main applicant. Accordingly, same set of documents (KYC, income) are required for a co-applicant as for an applicant.

Impact on CIBIL:

Note that the co-applicants’ CIBIL Score and CIBIL Record will reflect all loans in which he/ she is an applicant or a co-applicant irrespective of who pays the EMI.

[Source: http://myloancare.blogspot.in/2014/12/what-are-terms-and-conditions-while.html]

            

Loan against Property in India: Must-Know Advantages

In times of financial trouble, a loan can act as a life savior. One loan that can be a solution to numerous financial problems is loan against property (LAP). Loan Against Property is a secured loan which is provided against the mortgage of a property.

LAP can be applied by people who are self-employed and are in need of a huge amount of money. By applying for LAP, they can secure funds without renting or selling out their property.

When once applied for LAP, the property of the borrower is kept as a mortgage. The loan amount varies around 40-70% of the market value of the property.

Advantages of Loan against Property in India

Can Be Obtained Easily

Obtaining Loan against Property is not much of a hassle. Once the borrower presents security (read – property) and gets an approval on it, loan sanction doesn’t take too much time.

Can Help in Fulfilling Various Purposes

Loan against Property can be used for a number of purposes, such as:

To meet the financial needs of a commercial activity, trade, or for expansion of business.

To suffice a family member’s educational expenses.

To make repairs, extend or renovate an already existing commercial or residential property.

For urgent and unavoidable medical treatments.

Interest Rates Are Low

Loan against Property can be one of the best options to opt for as the interest rates of this loan are comparatively lower. Usually the interest rate of Loan against Property ranges between 11.5% – 13.75% while for personal loan it hovers between 16% – 20%.

Longer Repayment Tenure

Nothing can be more beneficial for a borrower than getting longer repayment tenure. Loan against Property offers the borrower longer repayment tenure, generally between 10-15 years which eventually eases out the burden of EMI(s).

Optimum Use of Idle Property

Many people own a property that lies unused for a long span of time. To make optimum use of such property, you can secure a loan against it. This allows the borrower to retain ownership of the property, and at the same time have an opportunity of acquiring a loan at a low interest rate too.

Continuous Ownership

In case you acquire the loan, but are not able to repay the amount, you have the flexibility of selling off the property and settling the loan amount. This gives you a chance to continue the ownership of the loan secured, along with the benefit of having surplus cash as well.

Flexibility of Loan Amount

Another benefit of Loan against Property is the possibility of securing a larger amount of funding. The lenders allow flexibility of loan amount, depending on the type and value of the property.

[Source: http://www.biz2credit.in/blog/2015/07/28/loan-against-property-in-india-must-know-advantages/]

Steps for NRIs to Sell a Property in India

Are you an NRI and inherit a property? Did you buy a home in India and got settled in other country. Are you planning to sell off that home? Here are the details.

Steps for NRIs to Sell a Property in India

For expats, selling a property in India from abroad is a challenging process, especially if they left the country years back. There are rules for an NRI in selling his/her inherited property in India and it requires legal help. Here is the step wise procedure on how NRIs can sell their inherited land or property legally without any litigation:

The process is quite similar for residential Indians and non-residential Indians except for the latter have tax implications and repatriation policies.

1. Title Transfer for Inherited Property

If the property is inherited, then the title should be changed to the seller’s name by the process of mutation of revenue records. This transfer requires a will or a succession certificate. If one cannot procure a copy of the will, then the local court can issue a succession certificate. With this certificate, one can apply for a title change in the mutation of revenue records office.

This procedure is time consuming and it is advisable to have them changed earlier.

2. Checklist of Documents Required for Selling

It is necessary to procure all the documents required for selling the property in India. Some of the documents include:

The title deed or mother deed of the property

No objection certificate to show the clearance of litigation and debts.

Occupation certificate issued by the municipal corporation

Plan approval/sanction certificate

Cooperative share certificate if the property is a part of a society building

Lawyer certificate, if any of the original documents were lost

Property Loan documents if any

Apart from these documents, the seller should have a PAN card number to sell properties that involve big amount transfers. The NRI can apply PAN to sell the properties or he/she can submit form 60 at the registrar office for the same.

3. Finding a Right Brokerage Firm

If there are no close friends or relatives to trust with the transaction, it is wise to consult a brokerage firm to assist in the selling process. However, if the seller has realty market sense and people to support then he/she can go ahead with the selling process on their own.

The brokerage firm can help you in suggesting the market situation, finding suitable buyers, price trends and risks involved. They can assist in fixing the selling price, applying for PAN and attorney service to obtain legal documents and tax implications. Although they provide end-to-end solutions, brokerage in India has no legal license and it could be troublesome if the brokerage fee is not fixed properly. It is advisable to find the right brokerage firm and fix the fee before initiating the selling process.

4. Sales Registration

It is essential to grant the power of attorney for the transaction to a PoA holder. There is no need to grant a complete power of attorney; instead the seller can give ‘Admit PoA’ rights to the PoA holder who will merely represent the owner in the registrar office. According to this, the seller should duly sign all the documents and the PoA holder will represent him in the sale registration.

However, issuing the PoA process differs from time to time and each firm will have a different process. Once the registration is complete, the seller should also concentrate on the tax implications.

[Source: http://loan-yantra.blogspot.in/2015/10/steps-for-nris-to-sell-property-in.html]

Personal loan or loan against property: Which one is better?

What is personal loan? Personal loan as the name suggests, is an unsecured loan that you can raise from bank for your personal use. 

There are no restrictions on the proceeds of the loan amount – you can use it to pay off your debt, construct a house, set up your business or even for your wedding etc. What is loan against property? A loan against property (LAP) is a secured loan disbursed against the mortgage of the borrower’s property. It can be residential property (either self-occupied or a rent), commercial property or even a piece of land.

Just like a personal loan, there is no restriction on using the proceeds of an LAP. You can use the LAP proceeds to finance your child’s education and wedding, to build a home for yourself, to meet medical expenses, to buy personal or commercial vehicles and even to finance your business. How to choose between the two?

Processing time: As a loan against property is obtained by mortgaging the borrower’s property, the lender has to verify related documents before disbursing the loan. The lender may also undertake technical study to confirm the ownership of the property and find out its market value. In addition to this, you will be asked to submit documents supporting your income to judge your loan repayment capacity.

This entire process can take anywhere between 15 to 30 days and hence, Loan against Property is not suitable for those seeking quick disbursal of loans. Personal loans on the other hand, do not require any collateral. Lenders usually judge your application on the basis of your monthly income and credit score and hence, your application may get approved within 7 days.

Interest rates: Being a secured loan, the interest rates of LAP is usually lower than that of personal loan. This can be anywhere between 11% and 16%. In comparison, interest rates of personal loan can be as high as 24%.

The main factor determining the interest rates in personal loans is the borrower’s credit score. LAP will suit those who are unable to get a good personal loan deal because of poor credit scores.

Tenure of loan: In case of LAP, the loan tenure can be as high as 15 years whereas the upper limit of personal loan is usually around 5 years. 

The longer tenure of loan repayment brings down EMI payouts, which increases the affordability of big-ticket loans. However, the flip side is that the longer tenure would also result in higher interest payout.

[Source: http://www.moneycontrol.com/news/loans/personal-loan-or-loan-against-property-which-one-is-better_6365581.html]