What Are the Different Fees and Charges on Loan Against Property?
Loans against property, also referred to as property loans, are a type of secured loan that individuals avail of against a residential or commercial property or a piece of land. The borrower pledges a property they own as security and avails of a loan against it. Property loans have become quite popular in the recent past due to low-interest rates, higher loan sanctions, long repayment tenors, and end-use flexibility. However, if you are planning to avail a Loan against property, it is important to understand the various charges associated with it.
Fees and Charges Involved in Loans Against Property
1. Interest Rate
An interest rate is a percentage charged on the total loan amount that is borrowed. A Low loan against property interest rate can significantly ease loan repayment. Low interest rates translate into low and feasible EMIs as well as reduced costs of borrowing the loan. To avail themselves of low-interest rates it is important to maintain a high credit score and a stable income. Also, the property to be pledged for the loan should have good market value.
2. Processing Fee
Borrowers who apply for a loan against property or a property loan might have to pay a one-time, non-refundable processing fee to process their loan application. The loan against property processing fee ranges from lender to lender depending on the total loan amount.
3. Legal Charges
If a lender decides to offer you a loan, they will release a loan sanction letter. This property loan sanction letter is conditional and is turned into a proper property loan offer letter only if all the documents provided by the borrower pass the verification check.
4. EMI Bounce Charges
In case you are unable to pay your loan EMIs and the cheque you have submitted bounces, you will have to pay an EMI bounce fee. Lenders charge this fee as a percentage of the missed EMI amount. However, missing an EMI can impact your credit score. Therefore, avoid defaulting EMIs.
5. Loan Rescheduling Charges
Loans against property or property loans are long-term loans and therefore, sometimes borrowers can request their lender to change the terms and conditions of the loan. For instance, if a borrower asks for a longer repayment tenor, the lender may ask them to pay a loan rescheduling fee.
6. Penal Interest
If you miss a loan EMI your lender may apply a penal interest. The penal interest is a substantial amount, thus it is important to make the repayments on time. Further, when borrowers miss EMI payments their credit score goes down too, which in turn, reduces one’s future loan eligibility.
7. Switching Fee
If during the tenor of your loan, you decide to switch from floating to fixed interest rates or a higher floating interest rate to a lower floating interest rate, you may be asked to pay a switching fee.
8. Documentation Fee
Lastly, your lender will also ask you to pay a documentation fee to ensure that all the required documents have been submitted.
Final Words
When borrowers avail of a loan against property or mortgage loan, there are some fees and charges involved, which they should be aware of. It includes the interest rate, processing fees, legal charges, EMI bounce charges, etc. Understanding these charges will help you plan your loan EMIs better.
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