Running a business is one of the biggest challenges in life. You have to manage various different aspects of the business and at the same time ensure its growth and profitability. It requires you working overtime as well as travelling all over the world, in order to meet the vendors and buyers. Moreover, to get your business started, you need to invest your own savings, but after a certain time you would start feeling the paucity of funds, as your personal finances would have exhausted, and the payments have been delayed from the debtors. You cannot stop your business activities and wait for the money to be received from the debtors. It is up to you to arrange the money to invest in the business as well as expand your infrastructure to keep the company growing. Otherwise, you might lose out the advantage to your competitors. There are various sources of finance available at your disposal, but the decision that you have to take is that which product would meet your requirements in the best possible manner. If you have a property, residential or commercial, then the best option for you is to Avail a Loan Against Property.
What is a Loan Against Property?
Loan Against Property is a secured financial offering that is provided by a large number of financial institutions in India. In order to avail the money, you need to mortgage your property with the lender, who would then sanction the loan to you. If there is a Home Loan running on the property, then you must Apply for Loan Against Property with your Home Loan provider only, as a Loan Against Property requires pledging of original property documents with the loan provider.
As it is a secured offering, the rate of interest is much lower than unsecured loans, and the amount available depends on your requirement as well as the value of the property. The maximum repayment tenure that can be availed can go up to 20 years, depending on the lender. You are free to use the money as per your requirements as there is no need to inform the lender regarding the end use of the money.
With the increasing integration of technology in the finance sector, you can now apply for a Loan Against Property online. You can apply directly using the website of the particular lender or use online finance marketplaces like MyMoneyMantra. Here you can compare different loan products, their terms and conditions, interest rates, and other features, and then make an informed decision.
Loan Against Property Term Loan vs. Overdraft
There are two modes of availing the facility of Loan Against Property:
- As a Term Loan
- As an Overdraft
It is entirely up to your discretion as to how you want to avail this facility, as both these options have their advantages as well as disadvantages. In most cases, it comes down to the suitability for a particular borrower. Here is a comparison of these two options that will help you to decide their suitability for your requirements.
- Usage of Amount
A term loan that is provided by the lender to you is for a specific amount and carries a specified rate of interest and must be repaid as per the agreed loan schedule.
Whereas, an overdraft is a facility provided by a bank to you, which works on the principle of line of credit. You are assigned a particular limit that you can use for your expenses, the limit reduces and replenishes based on as and when you use the money and when you make repayments. It is very similar to a Credit Card.
- Interest Expenses
A term loan carries a fixed interest rate that has been computed based on the total amount borrowed by you. The lender is not concerned if you have used up the entire amount or not.
In case of an overdraft, you have to pay interest only on the amount utilised, which is calculated don end-of-day basis. The rate of interest against an overdraft facility is higher as compared to a term loan.
- Repayment Tenure
A term loan has fixed repayment tenure and must be repaid within the specified period only. The repayment period for a term loan can extend up to 15 years and beyond also, i.e., there is a fixed period by which your liability would be finished.
In case of an overdraft, you only need to pay the interest every month; it is up to you if you pay any money towards the principal amount or not. However, your total limit would not be replenished if you do not make a payment towards principal. This is a perpetual product without any fixed closing date.
- Suitability
Overdraft is more suitable for day to day short term expenses which must be paid on time whereas term loans are suitable for capital investment as you have to repay them in Equated Monthly Instalments (EMIs) only and can claim deductions against the interest paid.
- Repayment Options
You need to make lump-sum payments towards the settlement of your overdraft dues and can foreclose it any time you want. Your limit can be reduced or enhanced by the banker based on your credit score and usage patterns. In the case of term loans, you need to make EMI payments every month as per the loan repayments schedule. Foreclosing may attract some charges, depending on the lender.
Opting for an overdraft facility or a term loan is entirely up to your requirements. If your financial situation does not allow you to make regular EMI payments, you may opt for overdraft facility and as and when your financials improve you can get it converted to a term loan.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.
Be First to Comment