Business

All You Need To Know Loan Against Property

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If you’re an aspiring entrepreneur looking to start your own business or have already started one, then access to funding is probably on your radar. One way to get some access to funds is to opt for a business loan. Another way is to go for an MSME loan. While these are two of the most popular ways for a business to gain funds, there’s also a third way – loan against property. If you’re interested to get to know all about this unique way of getting funds for your business, then continue reading.

What is Loan Against Property?

As the name itself signifies, loan against property involves pledging of an asset, which is usually a property such as land or a building, to get a loan. Unlike a business loan, which is generally unsecured, a loan against property is secured since you’re effectively giving a property of yours as collateral. Also, considering the fact that you’re pledging an existing property, getting such a loan is typically easy too and requires far less effort.

Eligibility Criteria for Availing a Loan against Property

Okay so, now that you know what loan against property is, let’s take a look at the eligibility criteria.

  1. Unlike an MSME loan, loan against property can be availed by both self-employed and salaried individuals.
  2. The age of the applicant must be above 25 and below 70.
  3. The applicant should have prior business experience of at least 5 years, if self employed or 3 years of work experience, if salaried.
  4. The applicant must be a resident of India.

Here’s something that you need to know. The eligibility criteria explained above is merely illustrative and not conclusive. Depending on the lending institution, the criteria might change slightly or new ones may be introduced.

How Much Can You Expect to Avail As Loan from Your Property?

Now, to avail loan against property, you must possess either a residential property, commercial property, or industrial/joint ownership properties. Keep in mind that the property that you own must be completed and ready for use. If your property is still under construction or hasn’t been handed over to you, you cannot avail a loan.

Generally, loan against property is usually restricted to around 85% of the net current value of future rental income or 50% of the total property value, whichever is lower.

Factors That Can Affect Eligibility to Avail Loan against Property

Here’s a quick look at a few of the factors that can affect your ability to get a loan against property.

  1. Your age
  2. Your credit score
  3. Your employment status
  4. The type of business
  5. The type of property being pledged
  6. The market value of the property
  7. The property’s location

Conclusion

As you can see, it is quite easy to avail a loan against property. That said, this form of funding works only if you have a property to pledge. What if you’re just starting out on your business and you don’t have any property on your name? That’s where a business loan and an MSME loan comes into the picture. Since they’re both unsecured loans, you can avail them without any collateral requirements whatsoever.

Sounds good right? If you want to gain access to funding without having to put up a collateral, reach out to Finserv MARKETS right away. You can browse through the various business loan and MSME loan options and choose the one that’s perfect for you.

Pax Heber
the authorPax Heber