One of the most commonly opted for the loan today by users all across the nation is the property loan, which can also be termed as the home loan. The well earning corporate sector today, which has mostly youngsters, has taken the demand for home loans to an all-time high, with due credits to demonetization. A lot of the people today wish to have a house of their own, instead of paying rent every month. Unless you are not living in an extremely posh area, it is always better to have your own house. Apart from those who readily opt for home loans, there are also a lot of people who avoid it due to certain misconceptions about loan against property.
Given below are five of the most common myths that people have regarding property loans. This often makes them averse to taking home loans altogether.
- Residential Property is the Only Usable Collateral – One of the most common misconceptions held by people is that they can only use a residential property as collateral. All you need is documentary evidence to prove your ownership, thus a commercial property can also act as collateral for a property loan. However, in the end, it all depends on banks discretion, whether they accept the collateral submitted by you or not.
- Increased Interest Rate Means Inflated EMIs – One of the popular fear that a lot of people who wish to take a home loan have is; they would have to pay inflated EMIs due to rising rate of interest. Whenever there is an increase in the rate of interest, the banks increase the number of EMIs you need to pay, instead of increasing your monthly rate of interest. This way you still end up paying the equal amount of interest every month. Although for a longer period of time.
- Lowest Interest Rate Loan will be Cheapest Loan – Apart from the interest rate, you also need to pay attention to the comparison rate. This is given right next to the rate of interest and includes several other fees and charges that you will have to pay apart from the interest. This not only makes you pay more than a loan with a higher interest rate but also brings along other complications. If you are interested in taking a loan with a lower rate of interest, you should also know that it will have way more limitations than a loan with a higher rate of interest.
- The Collateral Value Determines the Amount of Loan you receive – Well this is not entirely wrong, but there is a lot about this clause that people don’t know of. The value of your collateral is determined by an evaluator, and depending on the current value of your collateral, your loan amount will be sanctioned. This has nothing to do with the original price of the property you bought it for. Once the value of your collateral is determined, a large percentage of that value will be given to you as the loan.
- Shifting Loan from one Bank to Another Requires repaying the complete Amount – One of the most dreadful misconceptions held by people is that they will have to repay the complete loan if they wish to switch banks in between. Due to the ‘home loan amortization sheet’, a breakup of your principle and rate of interest is created, taking into account all the EMIs that you have paid. The new bank, to which you wish to transfer, will then calculate the remaining principal and EMIs you need to pay. Thus leading to an almost similar amount of rate of interest and remaining EMIs.
Conclusion – We often make simple things complicated due to our own lack of understanding or inhibitions. Obtaining a loan is certainly not a challenge if you have a stable and regular source of income. In-case you do not have any collateral, you will have to arrange for a guarantor, and there is precisely a way out in all situations. If you are looking for a loan against property, do not hesitate to go to a bank today and get rid of all your inhibitions and misconceptions regarding home loans or property loans.