If you own a flat, it can be
leveraged to raise funds or consolidate debts during a financial crisis.
For most of us, purchasing a
flat simply means getting a permanent roof over your head, which is why the
decision often gets put on hole. However if you look at it from a broader
perspective, the flat is much more than just a residence to dwell in or an
investment that will grow in value. In effect, we are creating a tangible,
concrete asset, whose value can be leveraged at different stages in variety of
ways going forward.
When faced with high inflation
and rising interest rates, one can unlock the inherent value of a flat by
taking a loan against self-owned property. Loan against property refers an
amount disbursed against the mortgage of property with the lender. It happens
to be the easiest way of securing a substantial loan at a very economical rate
(way below market rates) for a reasonably long tenure.
Comparative analysis
Managing a financial crunch by
loading up on credit cards or taking personal loans is dangerous because of the
extremely high interest rates charged. In the process, one could end up driving
up borrowings to huge amounts, since this is considered unsecured debt.
Instead, if you take a loan against property, the rate of interest itself would
be considerably lower.
Multiple benefits
The compounding of interest on
the pending amount that happens with credit cards would be averted. Best of
all, the option of having longer repayment tenure as compared to a personal loan
or card repayment means that one is not burdened too much at the initial stage
when quite frankly, its difficulty to keep that money aside. So the smart thing
is to just take a loan against property and raise capital in the most
economical way.
Paper involved
Since a loan against property
is a secured loan, there is a lengthy verification procedure involved, which
effectively means that it will take a bank longer to disburse it vis-a-vis a
personal loan, for instance. The documentation required is also much more in
the case of a loan against property as compared to a personal loan. Borrowers
should keep this in mind and understand that there is a difference between the
‘cash in a flash’ concept and taking a secured loan.
Money management
While a personal loan would be
easier for raising funds in an emergency, like a major surgery or a natural
calamity like floods, the smart thing would be to also apply for a loan against
property and use the amount of repay the personal loan as soon as possible.
Mortgaging a house is an
extremely emotional task for a family so all members tend to put in greater
efforts to repay the mortgage as soon as possible. With banks also providing
the option to prepay part of the loan in advance, it is possible to wrap up the
loan ahead of time and free your property from being mortgaged, a win-win
scenario on all counts.
The lap formula
- Perspective on long-term implications
- Systematic repayment with interest
- Consolidate many debts into a single one
- Reshape your finances and stay afloat
- Get some breathing space from creditors
- Monthly outgoings reduce considerably
