A loan against property comes under the category of secured loans and is preferred by many over personal loans as a viable funding option. Opting for LAP would require you to mortgage your property against which a lender will be offering you an advance.
This loan can be up to 75% of the total valuation of a property. The LTV available against a particular property can be decided against several parameters. Further, the interest rates applicable may also vary according to different factors and from one lender to another.
Existing lenders who find themselves servicing high interest rates can opt for a loan against property balance transfer and reduce their EMIs effectively. However, to leverage optimum benefits, they should know about this facility in detail.
What is loan against property balance transfer?
Existing LAP borrowers can transfer their outstanding loan against property balance to a new lender to avail better interest rates and services. It allows borrowers to reduce the interest burden as well as the EMI outgo.
However, to avail this facility, individuals need to fulfil all crucial loan against property eligibility criteria. Usually, lenders approve this offer only to those with a spotless repayment history.
Besides lower interest rates, a loan against property also entails several borrower-friendly features that individuals need to know.
Features and benefits of loan against property balance transfer
Opting for a loan against property balance transfer involves certain advantages –
- Reduced EMIs
A balance transfer facility helps cut down EMI amounts noticeably. Shifting from one lender to another might prove to be a wise choice and help you save substantially on EMI payments. Moreover, for better understanding, you should use a loan against property EMI calculator to estimate the monthly instalments and total borrowing cost.
- Competitive interest rates
A loan against property balance transfer allows you to curtail the interest amount as well. For instance, a lender offering a loan against 6% interest would be a much better option than your present one charging 7.25%. And in due course, this slight difference can offer great savings in the interest amount paid.
- Top-up loan
Another advantage of transferring an outstanding loan against property balance to a new lender is access to additional funds over and above the existing loan. You can utilise the fund for any financial requirement without any restrictions. Usually, individuals use the funds to finance their child’s education, wedding, travel, etc.
However, the top-up loan amount depends on the outstanding balance transferred. Moreover, to avail this fund, you do not have to submit any additional documents.
- Flexible repayment options
While opting for a loan against property balance transfer, individuals can also choose a tenor as per their repayment capacity. However, it will be wiser to check the EMI payable and interest accrual before selecting a tenor.
Note that a longer tenor attracts higher interest pay-out and vice-versa.
- Minimal additional charges
Individuals can also make part-prepayment of the loan to reduce the EMI burden or tenor, whichever is feasible for them. They can also foreclose the loan and transfer it to a new lender easily. Reputed HFCs allow individuals to avail these facilities against zero additional cost.
However, they should consider the processing charges that are payable to a new lender.
- Quick disbursal
Once you know the documents required for loan against property, it will be easier to start a fresh loan account with a new lender. However, in some cases, a lender may ask for only a few basic documents before approving the balance transfer. It facilitates instant approval and quick disbursal.
- Better debt management
Opting for a balance transfer eventually helps you to reduce the overall burden of your debt. Selected financiers also allow you to track your loan online so that you can stay updated about all transactions.
These are some most crucial pointers about loan against property balance transfer that individuals need to know before initiating the process.