When it comes to buying a property, most people need financial assistance. Property loans are the go-to option for those who are unable to pay for the purchase upfront. A loan used to buy land, a flat, or a building is called a property loan.
However, with so many different types of property loans available, it can be confusing to understand which one best fits your needs. It also matters as property loan interest rates may vary from one type of loan to another.
Let’s explore the different types of property loans and understand each type better.
Term Loans
A term loan is a type of property loan where the borrower receives a lump sum of money upfront and repays it over a set period with fixed monthly instalments. The repayment period can range from 5 to 30 years, and the interest rate can be fixed or variable.
Term loans are commonly used to finance the purchase of property or other major assets, and the borrower must provide collateral to secure the loan. The loan amount and repayment terms are typically based on the borrower’s creditworthiness, income, and financial history.
Loan Against Property
A type of secured loan, loan Against Property (LAP), is given using a property as collateral and can be used for any purpose. It has a lower interest rate than unsecured loans.
LAP has a longer repayment period of up to 15 years, and the loan amount depends on the property’s market value and the borrower’s income, credit score, and repayment capacity. Loan against property eligibility is considered based on age, income, property value, and repayment capacity.
Flexi Loans
Flexi loan is a type of property loan that combines the features of a traditional term loan and an overdraft facility. It offers borrowers the flexibility to make unlimited lump sum payments or withdrawals at any time without incurring additional fees or charges.Interest is calculated daily on the outstanding loan balance, and borrowers can choose to make interest-only payments if they wish.
Flexi loans are ideal for those who require greater flexibility in managing their finances, as they can access funds as and when needed and make repayments at their own pace.
Overdraft Loan
An overdraft property loan is a type of loan that allows borrowers to withdraw more money than they currently have in their account up to a predetermined limit. The loan is secured by the borrower’s property, and the interest is charged on the amount borrowed.
This type of loan is useful for those who need quick access to cash, but it is important to manage the amount borrowed to avoid accruing high-interest charges carefully.
Additionally, if the borrower is unable to repay the loan, the property may be at risk of foreclosure.
Fixed-Rate Loan
For a fixed-rate loan, the rate of interest remains the same for the entire loan tenure, regardless of any changes in the market. This means that the borrower’s monthly payments will remain constant, making it easier to budget and plan for the future.
This type of loan is commonly used for mortgages and personal loans.
Fixed-rate loans are generally considered less risky than variable-rate loans, as borrowers can be confident in their ability to make consistent payments over time. However, they may come with higher interest rates compared to variable-rate loans.
Government Housing Loan
A government housing loan is a type of loan offered by the government to help individuals or families purchase a home.
These loans may come with lower interest rates and more favourable repayment terms than traditional loans offered by private lenders. They may also have specific eligibility requirements, such as income limits or residency status.
Government housing loans can be a great option for those who may not qualify for traditional loans or need additional financial assistance to purchase a home.
Conclusion
Property loans are a great way to finance your dream home or property investment. However, it is essential to understand the different types of property loans available and choose the one that best fits your needs. Consider the loan amount, interest rate, and eligibility criteria before applying for a property loan. With the right property loan, you can turn your dream property into a reality!
