A loan against property is a type of secured loan that has become popular nowadays. Individuals prefer this loan more because it has no end-use restriction, and any commercial or residential property can be kept as collateral to avail of this loan. Moreover, individuals can avail up to 40-70% of the market value of a property as a loan depending on the policies of a financial institution.
However, before moving on with the application process for a LAP, one should consider a few pointers to make an informed decision.
Various Important factors for loan against property
Individuals need to know these factors before applying for a LAP –
1. The repayment tenor of the loan
Although maximum lenders offer flexible repayment tenors, individuals must understand that a longer repayment tenor increases the cost of borrowing. Thus, even though the EMIs might be higher, individuals can opt for a shorter repayment tenor to save on the total interest outgo.
2. Availability of tax benefits
Since a loan against property does not have any end-use restriction, individuals can avail tax benefits if used for business purposes. However, individuals cannot avail of tax benefits if the LAP amount is used for transforming the mortgaged property. Individuals should conduct research under which sections these tax benefits are available and utilise accordingly.
After checking all the factors, interested individuals can approach any reputed financial institution and avail of a
loan against property. Individuals can use this for multiple financial requirements.
Other than using it for personal and business needs, individuals can also avail of a loan against property for educational purposes. Borrowers can choose this option even for their children’s higher education purposes.
Furthermore, several reputed financial institutions extend pre-approved offers on financial products like LAPs, home loans, etc. These offers streamline the loan application process and save time. Interested individuals can enter their names and contact details on lenders’ websites to check their pre-approved offers.
This is all individuals need to know before applying for a loan against property. Borrowers can check these factors before approaching their financial institutions for a loan. Borrowers can even use the online calculator available on the lender’s websites to calculate their EMIs and plan a budget accordingly.
3. Considering the LTV ratio
Another vital point to consider here is the loan-to-value ratio. Since it varies depending on a property’s location, size, current status, and other factors, individuals need to keep this in mind before applying for a loan against property.
4. The rate of interest being chargedÂ
The next important factor that individuals need to keep in mind is the
mortgage loan interest rate that is being charged. It depends on a number of factors like the individual’s income, credit history, repayment tenor, etc. Individuals should do thorough research and opt for a lender which offers the most affordable interest rates.
5. Processing fees and other charges
Individuals often tend to forget about the additional charges that come with the cost of a loan. Other charges include service charges, prepayment charges, statutory charges etc. Though this varies according to different lenders, yet individuals must keep track of all these additional charges imposed by the lender as they can increase the total cost of borrowing.
6. Eligibility criteria for the loan
The mortgage loan eligibility varies according to different lending institutions. However, some common factors that are considered are the borrower’s income, the market value of the mortgaged property,
debts and repayment track record.
Apart from these, the eligibility criteria include credit score, employment status, age, and a borrower’s financial standing.
7. Documents required
Most financial institutions require a pre-set of loan against property documents. However, there might be a few variations in the documents required. Therefore, it is important that individuals always check the required documents for availing of their LAP.
