Having a surrogate income will be more than welcomed by one and all. While it may not be able to substitute the primary income completely, it definitely adds on to make achievement of one's financial goals easy. Same is the case with the surrogate loan plans. While they may not be able to replace the main stream loan products, but can be of great help in building one’s financial capability to raise funds. So what are these loans? And can these help in meeting the financial objectives? Let us find out.
Let us first understand the nature of these loans. Primarily these are associated with property but are completely different than the usual property loans, popularly known as home loans. Unlike the standard home loans that are extended to buy a new property, these are tailored to unlock the potential of existing commercial and residential properties that one may own.
Following are the three most important forms of surrogate loans that one can explore to raise funds:
As the name suggests, this loan is extended against the loan that one is to receive in future. However, this is not extended on receivable rent on a residential property. This can only be extended on a commercial property.
Extended on both office and shops, the loan against rent receivables can go up to 50% of the market value of property. Notwithstanding the fact that the lessee should have a reputable background, the term of lese, net rentals and other parameters also come into consideration while deciding on the loan amount
It is a great way to maximize the return on investment that one would have made into a commercial property.
This is an interesting loan variant where the borrower can save just by having a current account with the bank where from where the loan against property interest saving is being taken. While not all banks are offering this product variant, for example Axis bank home loan product suite does not offer this loan surrogate, but is offered by other few prominent lenders.
This product primarily suits the business class borrowers since having a current account is mandatory. So how does this product works? The borrower's current account and loan account are linked and the floats or account balances as are commonly called play an important role in impacting the interest being charged on the loan. Higher balances will impact in lowering the interest rates and result in faster run off of the loan principal. The current account can be used like any other regular account and deposits or withdrawals are not restricted.
Generally the current accounts do have some balances and this product can further the cause of using these idle money to use.
The loan against property is one of the most used product variations to unravel the property value. While mostly used by, again, individuals in business, the product can equally be of use to salaried class as well.
A loan up to 60 – 65% of the current market value of the property can get extended as the loan for a term of about 10 years. The loan can be extended on self-occupied residential and commercial properties. Most banks, NBFCs, and housing finance companies offer this loan.
The most important benefit associated with these loans is that it does not restrict the use of loan amount. The money can be used to meet variety of professional and or personal needs.
Thus these loans become quite important in the scheme of options available to individuals.
While we have talked about the surrogate loans, it is imperative that one also manages the credit profile since any kind of dent on the credit worthiness can deprive one from having access to these loans. In such a scenario one would only be left with options to look out for personal loan with bad CIBIL score and that too may not happen if the credit score is below a certain level.
So be credit healthy and have access to various loan products at the time of need.