Today's Thought: “A medicine cat has no time for doubt. Put your energy into today and stop worrying about the past.” -Erin Hunter, Rising Storm

Which one is Better, Taking a Loan or a Mortgage?

Jimmy Carlo

Based on a borrower’s requirements, financial institutions offer different loan products in the market today. Consequently, it can be quite confusing to choose the most appropriate one that will suit one’s requirements. One such product that individuals get confused with is an unsecured loan and mortgage loan.

Before diving in, take a look at the definition of loan and LAP loan to make an informed decision.

Definition of loan and loan against property

In simple terms, a loan is a form of debt acquired by an entity to meet various monetary requirements. If borrowers want to know about mortgage loan, then the definition is pretty simple. It is a way to avail substantial funds by keeping the immovable property as collateral. 

Borrowers can acquire complete ownership of the property if they make the full repayment of a mortgage loan. There are two types of financial credits available in India – secured and unsecured loan. The mortgage loan falls under the category of secured credit and does not come with any end-use restrictions. The funds can be utilised to meet different purposes such as business expansion, financing medical treatments, funding vacations and educational expenses, etc. 

A loan can be of several types such as business loan, home loan, personal loan, etc. and come with different eligibility parameters and benefits. The loan disbursal can stretch up to 4 days for a mortgage loan depending on the financial institution. Meeting the eligibility criteria and providing essential documents can accelerate the process. 

Essential things to know in a mortgage loan

A loan against property is a secured form of credit to cover substantial financial expenses, as already mentioned. Following are the points borrowers must know before applying for a property loan.

1. Property valuation 

Before the financial lenders decide a borrower’s eligibility and the amount of loan to be sanctioned, lenders will gauge the property’s valuation. The loan amount will depend on the fair market price and not the past or future potential value. Reputed financial companies usually extend 50-60% of the market value of a property as funds. Therefore, borrowers must analyse the LTV ratio provided by lenders.

Related  8 Budgeting Tips for the First Year as a Home Owner

2. Interest rate 

Since it is a secured form of credit, the mortgage loan interest rates are comparatively cheaper than other loans and work as a better alternative to any other form of credit.

3. Repayment facility 

Since a high amount can be availed by pledging collateral, borrowers must fulfil the necessary income criteria to repay the entire amount. It can be repaid over a period of 12 months to 20 years, though the tenor varies from one lender to another.

Alternatively, to be on the safer side, borrowers can use a loan against property calculator by entering an outstanding amount, interest rate and tenor to have a clear picture of the EMI amount to be paid.

4. Tenor 

Any loan against property comes with a flexible tenor as compared to other credit options. Choosing a longer tenor reduces EMI amount and smoothens borrowers’ repayment burden.

Therefore, these are the 4 things borrowers must know before applying for a loan against property.

Eminent financial institutions also provide pre-approved offers over this type of loan to expedite the application process. Such offers can be availed on other financial products such as home loan, loan against property etc. To check your pre-approved offer, submit your name and contact number.

To conclude, a mortgage loan offers greater flexibility on interest rates, loan amount, tenor and feasibility of end-use. It is to be remembered, if the borrower fails on repayments, his rights over the property are transferred to the lender.

Leave a Comment

7 iOS Features That You Probably Did Not Know About Matt Ford – Monkeypox Experience Digital Marketing Monkeypox Beauty