In Dubai, getting a loan against property has become increasingly popular amongst individuals and businesses as it gives them the option to raise capital for their various needs against their existing properties. With the ease of doing banking in Dubai along with the competitive interest rates the banks offer, loan against property has become an attractive option to raise capital. The loan against property also comes with its own challenges like valuation variability, long processing time, extensive documentation, etc. This is where consultants like ’GrowBiz’ can help individuals and businesses. We at ‘GrowBiz’, with our experience in taking care of all the nuances related to loan against property help our clients get the best valuation on their property along with taking care of all the required documentation thus making the whole process hassle-free for them
.Loan against property is a type of loan where a borrower puts his property as a collateral guarantee to obtain a loan from a financial institution, this guarantee makes this type of loan into a secure loan as the banks money is secured in case of any default on repayment. In Dubai banks offer many benefits like lower interest rates, higher loan amounts and various options of repayment plans for individuals and businesses. The property to be put up as collateral could be a residential property, commercial or industrial property and the amount of loan depends on the value of the property and the repayment capacity of the borrower. It is however important to understand the risks associated with loan on property and also to get the right perspective, as a default on repayment could lead to loss of property. ‘GrowBiz’ helps its clients by doing extensive and thorough research for them to help evaluate their financial situation as well as selecting the bank that offers the best valuation along with the best repayment options to them.
Salient Features of Loan Against Property:
- Secured Loan: The loan against property is a secured loan as the bank can always recover its amount from the collateral in case of a default on payment and since it is a secured loan the rate of interest is lower as compared to unsecured loans.
- Loan Amount: The amount disbursed by the bank in the case of secured loans is higher than in unsecured loans and ranges from 60% to 80% of the property value.
- Flexible Plan: To manage the repayment of the secured loan, the repayment plans offered by the banks are usually flexible to make the repayment comfortable for the borrower.
- Interest Rate: Interest rates for loans against property are lower than other loans primarily because of the secure nature of the loan as well as long repayment plans.
Eligibility Criteria:
- Property Ownership: The borrower should have the property that he wishes to use as collateral in his name and it should be free from all legal liabilities and disputes.
- Credit Score: A bank or a financial institution assesses the credit history of the borrower, so it is important to have a good credit score.
- Income Stability: The banks and financial institutions also look at the income of the borrower and its stability to make sure that the borrower is in a position to repay the loan.
- Property Valuation: To meet the loan-to-value ratio requirements, a bank does a valuation of the property to be kept as collateral.
- Age: Age usually becomes a factor if the loan repayment plan is long and the borrower is above 60 years of age. Otherwise, you just have to be an adult.
Properties Eligible for Collateral:
- Residential Property: Residential properties include apartments, villas and independent houses which are usually used to get loans for education, medical expenses, etc.
- Commercial Property: Commercial properties include properties like retail stores and commercial buildings and they are used by businesses as collateral to get loan against property to get funds to cover operational costs or other business-related expenses.
- Industrial Property: Businesses also use their industrial properties like factories, warehouses, etc. as collateral guarantees to get loans.
Application Process:
- Research: The potential borrower prior to finalizing a bank should indulge in a thorough research of options provided by different banks such as interest rate, processing fees and loan repayment options.
- Documentation: All necessary documentation as required by the lender like proof of identity, property documents, income proof, credit history, etc. should be in order and updated.
- Application: The application of the loan as provided by the bank should be filled correctly and submitted along with all the required documents.
Repayment Options:
- Equated Monthly Installments or EMI: The most common repayment method is equated monthly installments which involves paying fixed amounts every month to the bank till the loan amount is paid back in full.
- Prepayment: Prepayment allows a borrower to pay back the loan before the stipulated time of the loan thus reducing the amount of total interest paid.
- Flexible Repayment: Some banks offer this option to the borrowers which allows them to adjust their EMI based on their current financial conditions.