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Is Availing Loan Against Property More Cost-effective Than Others?

michealanderson March 3, 2020

No matter how careful you are about your savings, there may be instances when your funds are drained, and you want some assistance to tide you over. At times like these, many people lean towards the idea of borrowing money from friends and relatives.

But a delay in payment can sour your relationships and the better idea would be to use an asset. Now, instead of selling off an asset, the better idea would be to use it as collateral and get a loan i.e, avail loan against property. Using property is therefore recommended while offering many benefits to the borrowers. Here is a short overview of why property loans are cost effective and how?

How A Loan Against Property Is Cost-effective?

  1. Long repayment option: Since loans against a property usually amounts to lakhs of rupees, several lenders offer long tenures going up to 15 years. Longer tenures mean that you have a longer duration to repay the loan, and hence, the EMI amount becomes more affordable.

  2. Affordable interest rates: Given the fact that you are putting up a high-value property as collateral, most lenders will offer affordable interest rates. When low-interest rates are coupled with long tenures, they help to further reduce the EMI burden.

The ownership of the property is continuous: While you are submitting the property, ownership documents to the lender, you continue to have the rights to use the property and retain ownership. Your ownership is threatened if you are unable to renegotiate the terms of your property loan in case of non-payment of EMIs.

The value of the property is likely to rise: As mentioned above, most tenures for such loans are usually long, going up to 15 years. The value of your property is going to increase in these years and your net worth is going to increase. You are thus ensuring that an immediate expense does not harm your future, financial growth.

You are utilising a financial investment: A home you are living in does not have financial merit except for its projected increase in value. By taking a loan against such a property you utilising an asset as collateral and getting a loan at an affordable rate of interest as compared to other loans available in the market.

While taking a loan is cost-effective and beneficial, as a borrower there are many things you need to be aware of:

  • You need to be the owner of the property to avail the loan. If the property is co-owned, then all co-owners are required to be co-borrowers.

  • All the paperwork with regards to the ownership of the property should be authentic and verifiable. If the lender has doubts about your rights to use the property, your loan application can get rejected which will have a negative impact on the credit score.

  • Most lenders extend up to 70% of the property value as a loan amount. Some also have a cap on the maximum amount you can avail. Visit the lender’s website to know the amount you are eligible for before you apply for the loan.

  • Never apply for a loan with a low credit score. It can lead to rejection of your application.


Loan against property is one of the oldest and most secured loans in India. Most businesses and individuals use it effectively. The loan against property interest rate is low and more extended repayment of tenure, proves to be more cost-effective than any other loans. Like every other loan, there is research required from your end to ensure you are getting the most -cost-effective loan available in lieu of your eligibility and repayment capacity.

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