Know the 12 major terminologies about loans against property

Loans against property are a popular option for those who need quick access to funds. However, it’s crucial to understand the terminology involved in such loans to avoid any confusion or misunderstandings. Here are 12 major terminologies you need to know:

1. Loan-to-Value Ratio (LTV): It is the ratio of the loan amount to the value of the property. This ratio helps lenders determine the amount of risk involved in lending money against a property.
2. Collateral: It is the asset that you pledge to the lender to secure the loan. In the case of loans against property, the property itself is the collateral.
3. Fixed Interest Rate: It means that the interest rate remains the same for the entire loan term.
4. Adjustable Interest Rate: It changes over time based on market conditions.
5. EMI: Equated Monthly Installment is the amount you need to pay each month to repay the loan. The EMI consists of both the principal amount and the interest charged.
6. Foreclosure: It is the legal process of seizing the property used as collateral when the borrower defaults on the loan.
7. Prepayment Penalty: A fee charged by the lender if you decide to pay off your loan before the end of the loan term.
8. Processing Fee: A one-time fee charged by the lender to process your loan application.
9. Margin: The percentage added to the base rate to determine the interest rate charged on the loan.
10. Disbursement: The process of transferring the loan amount to your bank account.
11. Tenure: The period for which you take out the loan.
12. Balance Transfer: The process of transferring your outstanding loan amount to a new lender at a lower interest rate. This can be beneficial if you’re struggling to make your EMI payments.