5 Myths About Loan Against Property - Eswari Capital

Posted On: 26-May-2022


Loan against property also known as mortgage loan is a collateral loan provided to you against your commercial or residential property. There are different kinds of loans like personal loans, gold loans, business loans and many more but among all these loan against property is the best one to meet your urgent financial need. You pledge your property with a bank or some trusted financial body in return of some large amount of funds which needs repayments together with interest rate on time.

The difference between other loan option and mortgage loan is that you can use this loan for any purpose, from wedding to medical emergencies you can use it for your own purpose. But if you do not have much idea about loans or finances then you're likely to fall in to some trap when it comes to myths about loan against property. These myths can lead you to wrong judgements and you might just end up making the wrong financial decision. Thus while considering loan against property these are some myths you must watch out and be aware of.

1. There's a myth that says that you can borrow an amount from the bank or any other financial body equal to the value of the property that you pledge against the loan. This isn't true and that's why it's a myth. You cannot borrow 100% of the total value of your property. Borrowers can borrow upto 60 to 70% of the total current value of your asset in a secured loan.

2. Collateral loans come with a lower rate of interest. Thus it's a myth when people say that you must take personal loans with higher interest rates instead of collateral ones. If you're sure about your repayments and if you know you'll be able to make timely repayments you must choose collateral loan, this way you'll have to pay much lower interest rate.

3. It's a complete misconception if you think or if you're told that you cannot use a property that you pledge. You can use it, you can reside in it. Till the time you make your payments on time in a fair manner toh don't lose possession of it neither do you lose the right to use it.

4. It's a myth that you can apply for collateral loans only if you pledge a residential property. Collateral loan is avaliable also if you own a commercial property that you're ready to pledge.

5. Irrespective of how high your income is you can avail collateral or loan against property. Income matters in all kinds of loan options and high income matters in other kind of loan options but in this one if you are under no debt, if you have a good and positive credit score and also if you earn a sufficient income you are easily approved of these loans.

You must know these points to clear your misconceptions about the myths revolving around loan against property. In the finance or capital market there are many myths which lead people to fall into trap and go for personal loans with increasingly higher rate of interests. Before taking any decision, borrowers should educate themselves by understanding the differences between secured and unsecured loans.