Debt consolidation enables borrowers to clear their outstanding dues quickly and comfortably. The process involves availing a new loan and paying off individual debts. Currently, there are various ways to consolidate debt, and one such medium is to avail a loan against property for debt consolidation.
The advantageous features and benefits of a loan against property allow individuals to club all existing dues (whether outstanding loans or credit card balance) and repay efficiently. Below are discussed benefits of loans against property debt consolidation and its working method.
Five benefits of availing a loan against property for debt consolidation
High loan amount to pay off all debts
When an individual applies for a loan against property, they pledge their property against which they gain the loan amount. Lenders usually offer higher loan amounts for a loan on property or mortgage loan around 70% to 75% of the property’s market value.
It means if borrowers pledge a property worth Rs.1 crore, they will receive Rs.70 lakh-Rs.75 lakh as a loan amount. By getting such a large amount as a loan, individuals can easily pay off multiple debts via one debt consolidation loan, i.e. loan against property.
Reduced interest rate to lower borrowing cost
One of the prime benefits of availing loan against property for debt consolidation is that this financing option comes with a reduced interest rate.
Since applicants pledge their immovable property, whether residential property, commercial or industrial, lenders have a lesser risk of loan default.
Thus, lenders get the security and assurance of making rightful claims of the property, which allows them to negotiate with applicants regarding interest rates. Applicants can use this financing product to consolidate high-interest loans and lower overall borrowing costs.
Convenient repayment option
While opting for a loan against property for consolidating debt, one must primarily focus on the repayment feature/facility. Usually, a loan against property comes with a lengthy tenor. If individuals choose a long tenor, they can automatically lower monthly payables, i.e., EMIs.
This will help them to lower the EMI burden and manage loan amounts efficiently. Additionally, they can take the help of a loan against the property EMI calculator. Here, prospective borrowers can select the different loan amounts and tenors and find out the suitable EMI.
Additional funding through Flexi facility
Individuals can also enjoy flexi advantage while availing loans against property for consolidating debt. This feature allows individuals to borrow money from the sanctioned loan amount as per requirement and pay interest only on the utilized loan amount.
This type of additional benefit or funding enables borrowers to access funds without the need to apply for a fresh loan to cover various expenses.
Simple eligibility and minimal documentation
Another benefit of taking a mortgage loan for debt consolidation is the ease of access. As the name suggests, a loan against property is availed by pledging property. Subsequently, they set a simple loan against property eligibility criteria.
The eligibility criteria may vary from one lender to another. However, the generic criteria include applicants must be a resident of India and own property within the country. Those who are salaried individuals must be working with any private, public or MNC and must be between 23 to 58 years old. On the other hand, self-employed individuals must have a steady income and must be between 28 to 70 years old.
Additionally, the documentation of a loan against property is also simple. Individuals have to submit only property documents, identity proof, address proof and proof of income. Reputed HFCs offer high-value loans against property at relaxed eligibility criteria and minimal documentation.
These financial institutions provide pre-approved offers to simplify the loan-availing process. These offers are also available on other financial products, such as a home loan. Individuals can check their pre-approved offers by entering names and contact details.
The above-mentioned benefits of loan against property and explanation of those benefits in terms of debt consolidation will help individuals to understand the working method of a financial product for a particular service. This will further help them to avail loan against property for debt consolidation without any second thought.