Credit Wisdom

Things to Consider while Getting a Loan for Commercial Property

Category: Loan Against Property

There could be situations in life where you would face a sudden requirement of money without any legitimate source to support you. That is when your commercial property will come handy. You would find many financial institutions that would be ready to give you a handsome loan for the commercial property that is owned by you. However, before taking any such loan, there are a few things to consider.

Check the rate of interest
It is obvious that while taking any loan, the most important thing to check is the rate of interest. As they are secured loans, loan against property interest rates will not be as high as unsecured loans like personal loan or education loan, but there would still be variation of the interest rates of different lenders. You would certainly not want to find yourself strangled financially just because you end up paying more than half of your monthly income for the monthly installments of the loan for commercial property. Thus, be double sure about the interest rates before getting into a deal with any loan company.

Facility for foreclosure
If you can manage to arrange the borrowed amount and pay it back to the lender company well before your term, you should do that as that will save you from paying interest for all the remaining months. However, any financial institutions do not encourage their customers to foreclose the loan on property. Thus, they charge a penalty for foreclosing the loan. This is what you need to check while taking any loan against property. It makes little sense to pay a penalty for closing the loan early.

The loan amount
The loan amount would vary largely on the value of the property. The assessment is done by the lenders and there is quite a variation that you would observe in the assessed values for different lender companies. Typically, the loan amount varies from 50-70% of the value of the property. Thus, if your requirement is a hefty one, you may want to choose a lender who would give the highest value to your commercial property during the assessment.

Other charges
While the agent would possibly have committed that there would be no additional charges other than the processing fees of the loan for commercial property, but there could be a number of them actually. Assessing charges, registration fees, and legal charges are some of the most common hidden charges which will give you a nasty surprise when you final quotation of the lender company. It is wise to have a clear discussion with the concerned lender and have a clear picture of the total charges that would be involved in the whole process.

No tax benefit
As repayment for loan on property does not give you any tax benefits, you may want to check once again if you are sure about taking this loan. You can rethink the situation and see why you need the money for. If it is for the education of your child, taking an education loan may prove to be a smarter option as that will give you tax benefits and offer lower rates as well.

Tags: Loan Against Property Articles