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Tips for Availing Loan Against Property Research Team | Posted On Wednesday, April 24,2019, 04:48 PM

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Tips for Availing Loan Against Property



Loan against property is a kind of secured loan that one can avail by pledging their property as collateral for the loan availed. A loan against property can be obtained by pledging a piece of land, commercial or self-occupied property with the bank. The loan can be availed for multiple purposes and are generally long term loans.

Discussed below are few important tips that you must consider before availing loan against property:

1. Assess your Cash flows and Repayment Capacity

Always choose your loan carefully by evaluating your current finances through your income and cash outflows. Choose a loan according to your repayment capacity and make sure to check the amount to be repaid before finalizing the loan. Your repayment capacity will be determined based on your current income and the proportion of your income you spend towards monthly instalments. In case your monthly instalments exceed 50% of your income then you are likely to be charged a higher rate of interest. Also, applying for a loan higher than your repayment capacity increases the chance of getting your loan plea rejected. Before applying for a loan, always determine the loan amount that you will be able to pay in future. Your borrowings should be aligned to your current financial position as well as your repayment capacity.

2. Check your Eligibility

Loans help you to avail funds readily so that you can take care of your emergency expenses. These loans can also be helpful in availing funds during a cash crunch. Different banks have a different set of eligibility criteria for sanctioning loan against property. As a borrower, make sure to go through the eligibility criteria set by the lenders you have shortlisted. Good research will help you secure loan easily and there will be fewer chances of rejection of your loan application. Borrowers can avoid the hassle of extensive research by visiting the online financial marketplace to search for LAP loan eligibility. These are a comprehensive solution for users who can avail all information on a single website. This will help you to make well-informed decisions.

SEE ALSO: Loan Against Property Interest Rates

3. Choose the Right Lender for Your LAP

Before applying for a loan against property,make sure to compare the rates of interest offered by various banks, NBFCs and loan aggregators. Different banks offer LAP at a different rate of interest. Compare various lenders by using the online financial marketplaces and their rates of interest. Use the online EMI calculator to get a clearer idea of the monthly instalments. The EMI calculator helps you to ensure that the monthly instalments come within your budget. Since these loans are long term loans you must also check other parameters like processing fee, loan-to-value ratio, terms and conditions, pre-payment charges etc., to choose the most suitable bank that caters to your requirements.

4. Check your Credit Score and Report

Banks and other financial institutions consider the CIBIL score before sanctioning the loan. Therefore, it is wise to check the CIBIL score before applying for the loan. Generally, a score above 750 is preferred to be a good CIBIL score. A good credit score will help you to secure a loan whereas a lower credit score reflects poor money management and lower creditworthiness of the borrower.

Applying fora loan against property with a bank will lead to a hard enquiry as a part of the loan approval process. Hard enquiries are made when a credit application is received.These enquiries negatively impact your credit score and generally lower the CIBIL score by 5-10 points. Thus if you have a low credit score, it is advisable that you make necessary changes to uplift your credit score and then apply for the loan.

5. Proper Documentation

Loan against property can be availed by salaried individuals employed in a company and by self-employed professionals and businessmen. The salaried employees must submit additional documents like salary slip, job appointment letter, bank statement along with other KYC documents and financial documents related to the property that will be mortgaged. While the non-salaried individuals must submit income tax assessment papers, KYC documents, financial statements along with legal documents of the property to provide proof of ownership of property. Submission of proper documents is necessary for your loan process to begin. Without authentic documents, your loan sanction process will be delayed, so make sure you tick all the boxes while submitting your property papers and personal documents.

Once the bank receives the documents, they verify all the documents and evaluate the market value of the property to determine the loan amount as per the LTV ratio. Generally, the loan sanctioned is up to 70% of the market value of the property. Once the lender has authenticated the credibility of the borrower, the sanctioned amount is directly sent to the bank account of the borrower.

SEE ALSO: What is meant by a loan against property?

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