If you require funds for some big amount of expenses, you can easily get a loan if you have an asset to keep as collateral or security with the lender. This security is usually an immovable asset or property like house, land, commercial establishment, etc. The lender will issue a loan against collateral or secured loan arrangement, once you fulfill the conditions. Lenders keep the asset until entire amount of loan with interest is returned. In case you are not able to pay back the loan within a specified time, you will lose ownership of the asset. Read on to know more about this type of loan.
9 Benefits of a Secured Loan Arrangement :
1. Consists of high value
You can get quite a high amount of loan starting from 1 lakh up to a few crores as you are keeping a security with the lender. Check your eligibility to get competitive interest rates while borrowing an amount.
2. Minimal documentation
You have to submit very few documents for application like your ID, income proof, etc. The lender ’s aim is to disburse the loan to you within a short time after you apply. That is why they would not burden you with the submission of a range of documents that would be difficult for you to arrange very fast.
3. Flexible loan disbursement
You can withdraw specific amounts as per your requirement after the mortgage loan gets approved by the lender. Pay interest only on the amount that you have withdrawn and it would be easier for you to repay back. You can also pay back only the interests in EMIs, depending on your lender’s terms.
4. Online transactions
Go for the online application and track your loan account remotely at a convenient time. This is one of the best features offered by lenders on secured loans.
5. Flexible repayment
In terms of repayment also, there is flexibility. If you are a working professional, you have to repay it before your retirement. In case you are self-employed, there is a maximum age limit, generally 60 or 70 years. You need to close the loan before the deadline.
6. Relationship managers
Some lenders may provide a relationship manager to help you with your queries, loan status, EMIs (Equated Monthly Instalments), etc. So, you need not call up the helpline or specific departments if you have doubts or confusion.
7. Insurance cover
Your lender may ask you to get a life insurance cover, in case you are applying for a home loan. The premiums are inexpensive and the policy would cover you during the entire loan duration. The lender may offer a property insurance cover to protect against accidents or damages. You can get funding for the insurance premiums also.
8. Loan transfer
You can transfer your balance loan to a different lender if you find lower interest rates, better repayment options, top-up loans, lesser charges, etc. after a specific period of time fixed by the lender.
9. Online loan EMI calculators
You will find online mortgage loan calculators for EMIs and eligibility. You have to put in required details and get information regarding the amount of loan that you are eligible for, the monthly EMIs, interest rate, etc. This would help to plan your finances well.
5 Types of loans that come under collateral loan includes:
Home loan
The loan is specifically for buying a house, apartment, villa, etc. You cannot utilise it for other purposes such as capital for your business, children’s education or marriage. If you are a salaried individual, usually, you will get a payback period of about 20 years but that would depend on your age. The lender fixes the payback amount in such a way that it is closed before your retirement.
Commercial property loan
For a small or medium business, you can apply for this type of loan. You may want to set up a store or buy a commercial space in an area which is busy for maximum time of the day.
Residential property loan
You may opt for this loan if you require repair, renovation or maintenance in your existing ownership property. It is applicable for both apartments and standalone houses.
Land purchase loan
You can take loan for purchasing a land for purposes like creating an additional property, setting up a new business or for your existing business, etc.
Business purchase loan
If you want to acquire a business from another individual, purchase an existing store, shop or commercial space, apply for a mortgage loan. This way you can arrange for funds if you are short of the adequate amount.
A loan against collateral involves keeping an asset as mortgage with your lender. It is a secured loan that takes care of your fund requirement for different needs like a medical emergency, children’s education, other personal expenses, etc. in case of non-repayment, the lender is free to sell off or use your asset as an owner.
