What are the different type of Loan Against Property?
Business Expansion Loans - Business entities can avail this facility for acquiring new machinery, purchase of plant, meeting working capital requirements, and invest in new technology or business. The lending banks require collateral in the form of property, residential, commercial, or industrial. Depending on the nature of the property available as collateral, the lending banks calculate the loan eligibility. For commercial properties, the LTV is around 55- 65%. In the case of industrial properties, the LTV reduces to 40-55% whereas the LTV in the case of residential property is in the range of 65-70%. 2. Working Capital Overdraft Facility - Banks sanction overdraft facilities against the property for meeting the day-to-day working capital requirements. Under such circumstances, the property is accepted as collateral. Lending banks estimate the amount of finance required based on the following figures: Property value and nature of the property Actual working capital requirement calculated as per the internal policies of the bank, usually the Projected Annual Turnover method. 3. Personal Expenses - Individuals can also avail Loan against the Property for personal expenses such as medical expenses, educational expenses, marriages, travel, as well as for purchasing consumer durables. 4. Home Renovation - Usually, people do not avail this loan for renovating homes as there are separate schemes available at comparatively lower rates of interest. However, there can be circumstances when the borrower might have to resort to avail a Loan against Property for home renovation. 5. Lease Rental Discounting - Some banks offer loans against the future rent receivables, especially in metropolitan and urban areas. One should note that the property that fetches the rent should also be mortgaged in favour of the bank. Banks usually finance in the range of 75% to 90% of the future lease/rent receivables. The tenure of such loans is shorter and should end before the expiry of the lease or the rental