A loan against property is a secured loan that can help you meet your varied needs. You can avail a loan against property to pay for wedding or travel expenses, medical emergency, education expenses, consolidation of debts, etc. Lenders offer loan against property at attractive rates and flexible tenures to help you pay the amount comfortably. While the interest outgo forms a crucial component of the repayment amount, different charges also add up in the total cost of borrowing. Therefore, before you avail a loan against property you must know about the various charges that you are required to pay to the lender. This will help you choose a lender who offers the best loan against property rate and transparent charges.
Here are loan against property interest rates and charges that you must know about.
Interest Rates
Fixed Interest Rates
When you opt for fixed interest rates, your interest rates and EMI remain the same throughout the tenure. Availing a fixed interest rate loan helps you plan your budget well and lock in the interest rates at the beginning.
Floating Interest Rates
If you take a loan against property at floating interest rates, your interest rates will keep fluctuating during your entire tenure.
Charges
Processing Fee
Typically, lenders charge a fee to process your application. This fee covers all the costs associated with processing the application like carrying cost, administrative cost, property evaluation cost, etc. Processing fee is usually 0.5% to 2% of your loan amount. You need to pay the processing fee, irrespective of the loan approval. The processing fee is a one-time cost that the lenders charge on all loan types.
Foreclosure Charges
If you plan the loan efficiently, you can prepay the loan and close the repayment before the end of the tenure. However, the lender can charge you a prepayment fee. The amount of foreclosure charges differ from lender to lender but it could be between 1% to 4% of the amount you prepay.
Legal Charges
The lender does not approve a loan unless they review the property and evaluate its value. They also verify the documents to check their ownership. Moreover, the lender carefully checks all the documents of the applicant to detect any legal issue. Also, a technical team is sent to the property site to verify the property. The cost of all these verifications is included in legal charges. The legal charges are based on the property value and loan amount.
Penalty Charges
If you skip the EMI or fail to repay the loan instalment once or twice, the lender can charge you a penalty fee or late fee. Depending on the loan amount, it can add up to a high amount increasing your cost of borrowing. The penalty amount is charged on the default amount.
The charges of loan against property can substantially increase your total cost of borrowing. Therefore, you must be aware of all the costs levied by the lender. Moreover, before you sign below the dotted lines, ensure to read the terms and conditions carefully to know about all the hidden costs so that you do not face any issues in future. So, time to apply for loan against property, today.