Charges

Charges

Just like several other borrowings there are several charges and expenses that will have to be paid at the time of taking the loan against property. Comparison on this front is a vital process in making the selection between different loans against property and hence there is a need to ensure that this aspect is considered properly. Some of the heads of charges that will be applicable are given below.

Upfront fee

There is an upfront fee in case of a loan against property that is in the nature of a term loan. The upfront fee is usually mentioned in terms of a percentage of the loan amount and it can range anything from 0.5% to 1.25%. There is, however, one more condition, i.e., the minimum upfront fee has to be a specific amount as has been fixed by the bank. What this means is that for smaller loan amounts the percentage figure might work out to be a lesser amount but the minimum amount will come into operation and this will be the amount that will have to be paid. The expense will also have an addition of service tax and the education process.

Processing fee

The processing fee comes into play in case of a general overdraft limit that is given as a loan against property. This figure is usually present according to the amount of the loan and will be given in various slabs. This means that up to a specific minimum amount there will be no processing fee after which a fixed fee for the next slab will be in operation. As the amount climbs there will be a processing fee that is calculated as a sum per lakh of the loan against property or part thereof. This ensures that the figure keeps on rising with a higher amount of the loan and here too there will be a service tax and education cess to be paid.

Documentation charges

Another charge that is quite common at the time of taking a loan against property is the documentation charge. These are expenses that are incurred on account of the completion of the documentation process related to the loan against property. Since there is a property present in the entire transaction it is necessary to consider the documentation charges that are incurred in the process. Documentation charges are also calculated as a specific figure depending upon the loan amount and will involve a certain minimum charge.

While looking at all these charges it is important to understand that the nature of the charges will remain common across various banks that are lending the amounts for loan against property. What will, however, change is the amount of the charge and in some cases the manner in which this is calculated. This makes the understanding process easier for the borrower because they just have to consider the amount spent and then this will give them an idea about the entire process.