Common Points to Keep in Mind while Applying for a Loan Against Property
A loan against property is a multipurpose credit option that helps an individual manage varied expenses like a child’s education, funding a wedding, business expansion, medical bills, and the like. Anyone with a tangible asset can avail loan against property. Not only borrowers can avail of a substantial loan amount by leveraging the property, but they also get to occupy it.
However, for the borrowing to be functional and worthwhile, there are specific pointers that borrowers need to consider before availing of a loan against property.
Common points to Keep in mind while Applying for Loan against property
Here are the pointers that borrowers need to get familiarised with while applying for a loan against property:
Compare interest rates:
The interest rate borrowers will opt for has a significant impact on the monthly instalments they have to pay throughout the repayment tenor. Borrowers should not commit themselves to one lender before comparing the interest rates offered by different lending institutions. It is prudent for a borrower to research and settle for one offering a nominal interest rate to minimize loan expenditure.
Choosing the right repayment tenor:
Another essential thing that borrowers should factor in is the repayment tenor. As loan against property is a secured credit option, borrowers are offered an extended repayment window. Hence borrowers must choose a loan tenor to help them repay the loan principal easily.
Estimating the loan amount:
Lenders sanction a loan amount equivalent to 80% of the property’s market value. But to know what will be the right amount to borrow, individuals must make a list of their expenses and estimate the loan amount they require. After getting clarity on the loan principal, borrowers should review their other financial liabilities, budget and monthly income status. Moreover, individuals should strictly opt for a loan principal they need and not the entire amount they are eligible for borrowing.
Evaluate property value:
The loan principal that one can derive is dependent on the property’s current market value. Hence, borrowers must know the property’s current worth and opt for a loan amount accordingly. Borrowers need to know the loan amount they are eligible for before availing of it.
Know about hidden charges:
Besides knowing about the interest rate, borrowers should also be well aware of the additional charges (processing fees, service charges, prepayment fees, statutory charges and more) that they have to bear while applying for a LAP to compute the overall cost of the loan and make an informed decision.
Maintain the CIBIL score:
The interest rate on loan against property depends highly on the CIBIL score. Borrowers with a healthy CIBIL score of 750 and above will be charged a nominal interest rate. In contrast, a poor credit score will lead to rejection of loan applications, or lenders will levy higher interest rates. Hence, borrowers need to know how credit score affects loan against property eligibility.
Know the eligibility criteria and documents:
Before making an application for a loan against property, borrowers will have to adhere to the following eligibility criteria.
- Applicants must be Indian.
- Salaried individuals must fall in the age bracket of 23 to 62 years.
- Self-employed individuals must belong to the age group of 25 to 70 years.
- Salaried applicants must work in a reputed firm.
- Self-employed applicants must have a stable source of earnings.
Besides meeting the eligibility criteria, borrowers should also have a well-rounded idea regarding the list of documents needed to apply for a loan against property.
Another vital thing that borrowers should look for pre-approved offers by several leading financial institutions on a wide range of financial products like loans against property, home loans etc. These offers streamline the application procedure and make it hassle-free. Willing borrowers can check the pre-approved offers by submitting their names and contact details.
On the whole, a loan against property is a secured financial mode by which borrowers can get their financial requirements mitigated easily. In addition, the easy accessibility of high-value loan amounts, extended repayment tenor, and lower interest contribute to the growing popularity of the credit option. However, borrowers need to consider the pointers mentioned above to make the most out of this financing option.