Things to keep in mind while bagging a Loan Against Property in India

A loan against property is a loan that is given on the basis of the value of your property. It is a secured debt but comes with a lower interest rate charge. It is possible to use the loan against property money for anything as per your needs.

A mortgage loan or loan against property is a boon for people in dire need of funding and It is a secured form of funding tool taken to meet various monetary demands, such as higher education, weddings, medical emergencies, or other urgent requirements. 

If you have a property in a prime location in a leading city in good shape, you don’t have to worry about liquidating assets and savings to arrange huge money. It is because you can use the facility of the loan against property (LAP loan).

Applicants mortgage their properties as collateral to raise funds and fulfil such needs. However, before obtaining it, one must factor in a few pointers like LAP interest rateeligibility criteria, essential documents required, and more to avoid hassles at the time of application.

5 things to consider before obtaining a loan against property

  • LAP interest rate

One must choose a LAP based on the interest rates that align with his/her repayment capacity after that Individuals can use an online loan against property EMI calculator in this respect. The tool will help them draw up a tentative EMI forecast with details regarding how many instalments they have to pay per month.

In addition, based on the interest rate and prominent lending corporations offers-

  • Fixed-rate loan against property

    where the interest rate remains the same throughout the tenor

  • Flexible rate loan against property

    where the interest rate remains low at first but can increase or decrease later based on the market rate.

  • Eligibility criteria for loan against property

Lenders specify a few eligibility parameters based on which they approve the application. They cross-check the below list to determine one’s eligibility-

  • Evaluation of existing liabilities
  • Tenor of existing business or total work experience
  • Applicants of 21 years old and above are eligible
  • CIBIL score above 750 improves the chances of quick approval

However, the list is indicative and may vary from lender to lender.

  • Documents required for assessment

Lenders determine a few legal documents for mortgage loan approval below are the documents-

  • Identity proof like voter card, PAN card, Aadhaar card, passport and driving license etc.
  • Last 3 years IT returns
  • Latest salary slip or business proof and certified financial statement
  • Last 6 months bank statement of salary account or active business account
  • Highest education qualification documents
  • Property documents owned by the applicant
  • Passport-size photographs of the applicant
  • Repayment tenor

Commonly, LAP is a long-term commitment. Thus, lenders provide flexible repayment options to help borrowers avoid defaults. While some institutions offer tenor up to 15 years and some reputed organisations extend a longer tenor up to 20 years. Applicants must go through all the types of loan against property available and select one offering convenient repayment tenor.

A few options provided by reputed financers are-

  • Loan against residential and commercial properties
  • Leased rental discounting
  • Loans for salaried and self-employed individuals
  • Loans against property for personal expenses, such as education, wedding and debt consolidation

Leading financers provide pre-approve offers on products such as loans against property and home loans etc., to streamline the application process.

  • Associated fees 

People often forget to notice additional charges involved while applying for any LAP which are below must check-

  • Processing fee: It is a non-refundable fee lender collect to handle and process applicants’ files.
  • Legal fee: It is the amount the lawyer charges for verifying the mortgaged property’s legal status
  • Penalty charges: Few lenders charge for LAP prepayment based on the interest rate.

Based on your LAP loan eligibility and lender’s policies, you can get up to Rs.1 crore at a lower rate of interest and pay reduced EMIs.

If you are the right candidate, you can get the loan approval faster with funds disbursed into your bank account within 4 days.

You also have the freedom to repay your loan against property over a flexible repayment tenor ranging from 2 to 20 years.

If you are already a LAP loan customer paying higher interest charges, you can switch to a new lender using the easy balance transfer facility. What’s more, you can also access a high value top up loan and use the money for anything without restrictions.

If you are in need of a higher amount without liquidating your assets and savings, applying for a loan against property is what you can do.

Additional checklist

Apart from these, a potential borrower must consider a few other points to avoid hassles. Some of them are-

  • Time taken by the lender to disburse the loan amount
  • Credibility of the lender
  • If the lender offers a loan against property balance transfer and a top-up facility

Applicants can also apply for any type of loan against property with a co-applicant with a CIBIL score over 750. This way, they can negotiate the LAP terms and conditions based on financial discipline.

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