What is a Micro Loan Against Property and how does it work?

A micro loan against property is a small loan that is secured by some form of property or asset owned by the applicant. Here is a brief overview of how these loans generally work:

• The purpose is to provide small business owners or individuals with access to financing by using their existing property as collateral for the loan.
• The property could be a home, commercial building, land, etc. The loan provider places a lien against the property, meaning if the applicant defaults, the banks or Non-banking Financial Companies (NBFCs) can seize the property to recover the unpaid loan balance.
• Loan amounts are usually quite small compared to traditional mortgages or commercial real estate loans.
• Terms are shorter than standard loans, usually 1-5 years for repayment.
• Interest rates are generally higher than conventional bank lending since these are riskier loans with less stringent applicant requirements.
• The application and approval process aims to be faster and simpler than those for regular property loans. Minimum eligibility criteria focus on the equity in the property rather than the applicant's credit score or income.
• The loans are designed to help applicants who may not qualify through traditional banks, providing expanded access to financing.