A financial emergency can arise at any time and leave you worried about a lot of things. Individuals consider opting for a personal loan to fund their expenses during such a crisis. However, they might face several challenges availing of a personal loan because of their strict terms and conditions.
A loan against property is a credit facility that allows you to get a sizable amount by mortgaging your personal or commercial assets. In addition, the interest rates on commercial property loan are quite low as compared to other loans, which makes it a good choice in times of a financial emergency.
Points to Consider While Opting for a Mortgage Loan Against Your Commercial Property
In case an individual is looking forward to keeping their commercial asset as collateral, they must consider these points:
Loan to Value Ratio–
LTV or loan to value is the proportion of the property’s value that the lending institution will finance. For residential properties, the LTV lies in the range of 75 to 90%. However, in case of a commercial property, the loan to value ratio is restricted to 55%. Therefore, individuals who want to obtain a hefty amount must select a lender that finances the highest value during property assessment.
Commercial shop loan interest rates–
The loan against property interest rates for commercial properties is considerably higher than that of residential properties. However, when compared to the interest rates of a personal loan, the commercial property interest rates are quite lower. Hence, willing borrowers must compare between the lenders and make an informed decision accordingly. This will help them manage their monthly expenses accordingly and protect them from unwanted credit defaults.
The property value of a commercial is usually higher than that of a residential property. Financial institutions might also check several other specifications of the property, such as lifts, shafts, elevators, emergency exits, fire extinguishing plans, etc. This check is done by a technical team sent by the lending partner, and based on this inspection, the lender assesses the value of the commercial property.
Commercial property’s age–
Older properties might not have the technical amenities as mentioned in the above point. Hence, new properties with all the modern requirements tend to attract a higher loan amount.
The commercial property must be at least 250 sq. ft. If the mortgaged property has an area less than 250 sq. ft., it might lead to a loan rejection. However, this factor varies from lender to lender. So, borrowers must check with their preferred lending partner before applying for a property mortgage loan.
Further, there are several tax benefits that an individual can claim on the interest paid against their LAP. Willing borrowers should know how to avail of the tax benefits and exemptions for a loan against properly before applying for this credit facility.
Apart from low commercial property interest rates, there are several other benefits of a loan against property. Willing borrowers should also know the documents required for availing of a loan against property. Keeping the necessary documents handy and producing them when necessary helps in fast approval and disbursal of the loan.
Almost every financial institution in India provides pre-approved offers on financial products, such as loans against property, housing loans, etc. These exclusive offers fasten the overall approval procedure and ensure a smooth borrowing experience. Customers can check their pre-approved offers by entering their name and contact details in the required section of their lender’s website. To sum up, the low commercial property interest rates and several other benefits of a LAP make it one of the best solutions for a financial crisis. Further, borrowers can use a LAP EMI calculator which helps them understand their monthly pay-outs. Knowing the monthly EMIs allows a borrower to plan their expenses accordingly and save themselves from financial burden.