Getting a loan has become
easier than ever in today’s day and age. Borrowers who need urgent financing
today can reach out to a wide range of lenders – banks and NBFCs, and get their
loan processed easily. Nowadays, most lenders even allow you to apply for loans
online. If you possess an asset, (e.g. property) you can get instant cash by
handing it over to a lender in return for cash. The lender returns your asset
back to you when you repay the amount, in full. This simple form of barter is regarded
as mortgage loan. Since mortgage loans involve a transaction in which the
borrower provides collateral to the lender, such loans are regarded as secured
loans. Let’s look at the many advantages of opting for this loan.
You
continue to remain the owner of your property: Mortgage loans are
also known as loans against property. In case you need finances urgently, you
may find the need to mortgage your property in return for cash. However, even
if you hand over the property documents to your borrower, you do not lose
ownership of your property. The property is not transferred in the name of the
lender; he purely serves as its custodian, until the loan is repaid. The only
circumstance in which borrowers stand to lose ownership of their property is
when they is unable to repay the loan, in which case the property is sold and
the lender recovers their investment.
You
can repay the loan in flexible tenures: Another great advantage
of the mortgage loan against property is that borrowers get flexible loan
repayment tenures. Most banks in India provide tenures of approximately 10-20
years to repay the loan. This gives the borrower ample time to repay the loan
and proves incredibly beneficial, especially when the loan is a high value
loan. The long, flexible tenures on mortgages also help reduce your financial
burden considerably. Additionally, the loan can be repaid in affordable equated
monthly instalments or even as overdrafts. That said, the lender determines the
overdraft limit based on the value of the property mortgaged along with other
factors such as your account history, credit repayment behaviour and credit
score.
You
pay a considerably lower interest rate: As mentioned above, a property
mortgage loan is a secured loan in which the lender takes (temporary)
possession of your assets. Due to this security feature, lenders have little to
lose and can recover their investment in the event that the borrower is unable
to repay the loan. As such, most lenders provide lower interest rates when you
mortgage a property. This interest rate is much lower when compared to most
other loans where one chooses not to provide collateral.
Your
loan is processed easily: Another great advantage of a property
loan is that it is easy to get it processed, once again due to the collateral
feature. Since the borrower is able to provide an asset in exchange for the
loan amount, lenders typically conduct a quick background check of the borrower
and the property mortgaged. The loan is granted at a much rapid pace as opposed
to a business loan for instance, in which risk factors are higher in the
absence of collateral.
