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Amritsar, home to the Harmandir Sahib—more commonly known as the Golden Temple—is situated in the state of Punjab, India. The main business and commercial industries are tourism, carpets, fabrics, agriculture and handicrafts.
Amritsar is home to some of the leading banks and other NBFCs in India. Are you looking for a loan against property in Amritsar and wondering what your options are? You have reached the right place. Read on!
If you need a significant amount of money and own property, then a Loan Against PropertyLoan Against Property is an attractive, and relatively reasonable, credit option to consider. People often view a property as being of value only in bringing in rental income or selling at an appreciated price. It is often overlooked as an asset when raising funds for business or personal expenses. If you need substantial funds, you can unlock the dormant potential of your property and raise funds at a relatively lower cost with this kind of loan.
A Loan Against Property is exactly what its name suggests – it is a loan where the bank or NBFC (Non-Banking Financial Company) lends you money and holds your property as security until the loan is repaid. Once you repay the loan in full, you get back your property. In case you fail to repay the loan, the lender can attach the property and dispose of it to recover the unpaid dues.
A Loan Against Property is a popular type of loan to take as it is one of the cheaper retail loans available. It is similar to a personal loan in that you can use the loan amount for any purpose – like debt consolidation, business expansion, education expenses, family or medical emergency. However, when compared to a personal loan, it offers a lower interest rate, and offers a larger loan amount over a longer repayment period. The key difference is that a Loan Against Property is a secured loan – the loan is secured by collateral - unlike a personal loan, which does not involve any security. This makes a Loan Against Property less expensive than a personal loan.
Taking a ‘property loan’ – or more accurately a loan with property as security – is a cheaper alternative to other kinds of flexible end-use loans, like a personal loan. A Loan Against Property is a secured loan which means that lenders can safeguard their lending risk with your property as collateral. On the other hand, personal loans are among the most expensive consumer loans to take as they are unsecured by any collateral. Generally, interest rates on a loan against property can range from 10-20% while interest rates on personal loans can range from 15-22%. Of course, each lender will fix the exact interest rate on your loan considering your credit profile, prevailing market rates and other internal policy regulations.
The size of the loan depends on the value of the property. Naturally, the more valuable the property, the larger the loan amount that will be sanctioned. Typically, you can get a loan for up to 60 % of the market value of the property and this can translate into a sizeable amount of funds. The loan amount on this type of loan is far larger than the amount you would get for a personal loan. Moreover, this larger amount comes at a lower interest rate than a personal loan.
Since it is a secured loan, lenders have a lower lending risk and are willing to grant a longer repayment schedule. The tenure for a loan against property can stretch up to 15 years while a personal loan has a tenure of only 1-5 years. A loan of this kind is advisable when you have a need for a substantial amount of funds which you can repay in the medium term.
Because of the longer loan period, the monthly EMI is also smaller, meaning it is a lighter repayment burden over the entire tenure of the loan. You might be able to get a similar sized personal loan amount but since the tenure is much shorter, and the interest rates are higher, the EMIs will be much heavier.
There are two types of interest rates:
The interest rate remains the same for the entire duration of the loan. Lenders usually offer this type of interest rate for a specific tenure of loan, and many may not offer this as an option at all for a loan against property.
The interest rate changes according to prevailing market rates. Since the rate changes and is dependent on fluctuating market conditions, it is not possible to predict a typical rate.
The floating interest is linked to the Marginal Cost of Funds based Lending Rate (MCLR). The rates are typically published on the lender website and could change periodically.
Loan against property are provided by almost all major banks and NBFC’s present in the city. Some of the best lenders are ICICI bank, Tata Capital, LIC HFL and PNB housing. In general interest rates vary between 10% - 24% per annum. The tenure varies between 1 – 5 years for short term loans while it is a maximum of 30 years. The processing fee lies between 1% - 3%.
Since most the paperwork is done at the time of buying the property, the documentation required for a loan against property is simple. All it requires is a clean title deed with no encumbrances – i.e. there should be no existing loans, mortgages or legal complications. Any of these have a negative impact on ownership and will make it very difficult, if not impossible, to secure the loan.
Like a gold loan, a loan against property allows you to leverage an asset that you already own. The property could be residential (house, apartment or plot of land), commercial or industrial.
A Loan against Property gives you the freedom to spend the loan amount for any purpose you wish, much like a personal loan or a gold loan. You can use it to expand your business (buy new machinery etc.), consolidate high cost debts, fund a child’s education domestically or overseas, or even to buy another property. Because of the larger loan size and the longer tenure, a loan against property is ideal for a substantial medium to long-term expense.
Each lender has its own criteria for Loan Against Property eligibility. However, in general, they could include:
Some lenders require that the applicant needs to be a resident of India. Other lenders do not have this restriction. Salaried NRIs can avail of a residential or commercial property loan subject to verification of property details.
the criteria could be different for salaried and self-employed individuals
The minimum age too varies. Some lenders require the applicant to be at least 21 years of age, but more generally, the minimum age is 24 years at the time of sanction of loan. The maximum age too varies depending on the employment status – there could be different limits for salaried employees, government employee, or self-employed professionals. It typically ranges from 58 to 65 years and can even go up to 70 years with some lenders. The maximum age is the age of the applicant at the end of the loan repayment period.
Includes self-employed individuals, salaried employees with the government or a reputed private company, or professionals, like doctors, engineers, architects, dentists, chartered accountants, management consultants with a regular source of income. Some lenders might have restrictions on employment status, for instance, restricting a Loan Against Property only to self-employed individuals.
This again varies depending on the lender and which city the property is located.
The lender will make a decision on your eligibility based on the loan amount applied for, purpose of the loan, your ability to repay and the value of the property being mortgaged.
You can download the application form from some of the lender websites. You can also call, SMS or email the service centers to get in touch with a bank representative. Once you have submitted the application, the decision could take up to a few weeks.
There is no fixed minimum or maximum amount for a loan on property, as this will vary with each lender. The amounts can range from a minimum of a lakh to a maximum of tens of crores. In general, you can expect to receive between 40- 60% of the market value of the property, with some lenders willing to go up to 70%. The market value is the price of the property if it were to be sold under current market conditions. The lender will decide the amount to be sanctioned based on a combination of factors including the amount required, ability to repay and the value of the property.
The tenure is also variable. These are also relatively long-term loans and the repayment period offered a maximum of 30 years.
You can pay your EMI in one of the following ways, depending on your lender and is generally similar to the payments made for a property or home loan.
If you have an existing savings or salary account with the bank you have borrowed from, you can issue a standing instruction for the EMI to be deducted automatically every month from your account. If you do not have an account with the lending bank, you could open an account in order to facilitate this mode of payment.
If you do not have an account with your lender, you could use this method for the EMIs to be paid automatically.
You could submit post-dated cheques for the EMI amount from another bank account. However, do keep in mind that several lenders offer only a floating interest rate on the loan against property. This means that if the interest rate is changed, your EMI could change as well and you will need to pay the difference separately. Alternatively, if you change the loan tenure, your EMI amount can continue as before even with a change in the interest rate.
Yes, you can get a loan on property even if it has multiple owners so long as all the co-owners are co-applicants for the loan.
Most lenders require that the property is insured against fire and other hazards for the period of the loan. This is to keep the value of the pledged security intact in case of a natural disaster.
Some lenders might have a list of cities where the property needs to be located. However, it is best to check this detail with each individual lender.
Yes, some banks will allow you to top up your existing loan once you have completed payments on your loan for a minimum period, usually six months.
Once the entire loan amount (including interest) is repaid in full with no pending dues, the property held as collateral will be handed back by the lender. When the account is closed, you can collect the ownership documents from your lender, typically within a few weeks.
It is always a bad idea to delay or skip payments on your EMI on any loan, whether a property loan or auto loan or personal loan. It can lead to serious legal consequences, financial loss and lack of access of credit in the future. Failing to make repayments could result in:
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