Published on Dec 31, 2019Updated on Aug 29, 2023
Rajan has been working very hard over the past few years to grow and expand his grocery businesses. However, in order to expand further, he needs funds to purchase a new warehouse. There is a warehouse available for rent, but he would need the money quickly in order to be able to score a good deal on the same. His financial advisor suggests that Rajan gets a loan against his property in order to get access to funds. A loan against property is a secured loan whereby you obtain funds by mortgaging a property you already own (commercial or residential) with the lender. A very important factor to note here is that while Rajan’s shop will be mortgaged to the bank or lending institution, he can still continue using it for commercial or residential purposes.
In fact, you can even use the loan for a credit instrument for anything ranging from sponsoring your business to your child’s education or marriage or using the finances for any other personal requirements, due to the generally attractive property loan interest rates
Here are some cases when you should, just like Rajan, consider taking out mortgage loans against property:
One of the key benefits of availing a mortgage loan against property is that you will be able to acquire financing almost immediately. There are very few market instruments that allow you access to funds so quickly and mortgage loans against property is certainly one of them. Loans against property provide as much as 70% of the market value of a property for residential units and up to 60% for commercial units.
Another key benefit of loans against property is that you can use the funds acquired for multiple purposes. The banking institution or lender who has lent you the money will not restrict the use of the sum lent to you. You can use the funds for anything from paying for medical expenses to financing a business expansion or paying for your child’s higher education or even renovating your house. Unlike other loans whereas the usage of the loan amount is tied to the loan being granted, in the case of a mortgage loans against property you are free to use the funds obtained in any way you deem fit.
One of the key benefits of a loan against property is that the interest rates being charged are generally much lower than those of other loans on the market. If you have a favourable credit score and a good borrowing history, most banks and lending institutions will offer you favourable rates of interest, helping you reduce the cost of borrowing funds.
In conclusion, loan against property is a useful mechanism of financing that can help you raise funds on a short notice with a lower interest rate than alternate financing mechanisms.
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