Alternate Loan Options for Real Estate Investments
Loans for investing in real estate have become much easier. Things have changed so much for home loans and land loans. As a property investor today, you can look beyond traditional bank loans. And new-age lenders are also simplifying the property-buying process.
What benefits do these new lenders bring? You could get loan approval within a day. Most of them send you regular updates via SMS and/or email. Customer support is readily available too. But before you jump on to the alternative bandwagon, it would help to gain some knowledge about them. Here is a sampling of the alternative lenders you could approach.
Online Mortgage Lender
These are lenders who operate through the internet. The process of getting a home loan is thus easy and convenient. You could get approval within a few hours in some cases. Borrowing from online lenders has some big benefits too:
- You can skip the processing fee.
- The documentation required is minimal.
- Fast approval is a characteristic feature of such loans.
But before you get onboard, do your research. Will the lender in question provide you a loan for land purchase? Or does it only deal in home loans for already-constructed homes? Get all the details before you sign on.
Hard Money Lenders
Hard money lenders give you a loan based on your asset. This is helpful for those who do not want to approach traditional lenders—particularly borrowers whose credit scores need work.
The advantage of going to a hard money lender is that they are less stringent about credit checks. These are typically private players who provide loans against the security of an asset. If you need a land loan, for instance, you may need to provide your plot as a security to the lender.
However, as such lenders are not always regulated, it is advisable to do your research first. The home loan interest rates will differ and may remain on the higher side. But you could negotiate for a more flexible repayment structure and benefit from the lack of a strict credit check.
Non-banking Financial Company (NBFC)
NBFCs have been operating in India for a while now. These financial institutions operate much like banks, but the processes tend to be quicker and more transparent. While NBFCs in India are not necessarily less stringent than banks, they do make life easier for the borrower.
- The application process is fast and easy.
- NBFCs require minimal paperwork.
- They also offer easy EMI options and scope for making flexible payments.
Loan Against Fixed Deposit
Do you have a fixed deposit (FD) with a bank or an NBFC? You could use it to get a loan too. This may sound unconventional, but lenders are often willing to give you a loan against your fixed deposits. Depending on your particular case, you could get a loan of around 80–90% of the fixed deposit amount.
Such a loan tends to have a lower interest rate than traditional loans. Assuming that you have enough funds in your fixed deposit to cover a land purchase loan, your land loan interest rates will be relatively low. You may end up spending much less on interest repayments.
These alternative lending options may be good options for your real estate purchase. But as with all other finance-related matters, make sure to do adequate research before choosing a loan. A home loan or land loan is a long-term commitment. So, you should commit to getting the most favourable deal that you can.