Availing of a secured loan such as a loan against property is considered a better alternative to unsecured loans. Although some individuals resort to selling their property to meet any monetary demand, it might be wiser to mortgage it and avail of a LAP, as it would let you obtain the required funds and retain the asset’s ownership.
Apart from term credit, mortgage loans are also available in the form of an overdraft facility. This aspect benefits the self-employed individuals the most as they can draw funds as per their fluctuating capital requirements, and interest is only imposed on the utilised funds.
However, despite its multiple advantages, here are some points that one needs to consider while evaluating a loan against property as an option.
- Loan quantum
The principal amount that individuals can avail as LAP depends on the property’s market value. Usually, individuals can get 40% – 70% of the property’s market value as a loan. The loan quantum may differ from one lender to another for the same property. So, individuals have to research well regarding financial lenders to get the highest loan amount.
- Interest rate and tenor:
The interest rate may vary from one financial institution to another. One needs to find a suitable lender who will provide loans at an affordable interest rate.
This type of secured credit comes with a flexible tenor of up to 15 years. Choosing a longer tenor can make your EMIs smaller, thereby increasing the affordability of availing a loan. But remember that opting for a longer tenor will increase the borrowing cost. Hence, borrowers must use a loan against property EMI calculator to determine their affordability and plan the repayment accordingly.
- Loan against property eligibility and documentation:
To avail of a loan, individuals must qualify loan against property eligibility parameters based on their respective professional type. Usually, these vary across financiers. However, a few standard ones are discussed below –
Salaried
- Individual’s age should be between 33 and 58 years
- A borrower should be a salaried employee in a private limited company, MNC, or public sector
- CIBIL score must be 750 or more
Self-employed
- Borrower’s age should be between 25 and 70 years
- Individuals should have a steady flow of income from the business
- CIBIL score must be 750 or more
To avail of this form of credit, borrowers need to keep some necessary documents handy to support their eligibility. Providing proper documents can improve the chances of approval. Some of the loan against property documents required are listed below:
- ID proof of the applicant
- IT return statement
- Address proof
- Salary statements of previous 3 months (for salaried), bank account statements of previous 6 months (self-employed)
- Mortgaged property’s documents
- PAN card/Form 60
Apart from the documents mentioned above, remember that any financial lender will not accept an application for a loan against property without income proof, as this document holds utmost importance based on which loan amount will be sanctioned. Financiers determine your repayment capacity on the basis of income proof.
- Decent CIBIL score
The credit score reflects your creditworthiness, repayment history, past credit behaviour, etc. This is why most financial lenders check the score and credit history before approving a loan. Thus, it is important to prove your financial worth by displaying income status and apply for a loan against property with a credit score above 750.
Borrowers must consider other factors as well, including the precise amount they will require. Since a loan against property does not involve any end-use restriction, borrowers can utilise the amount any which way they want. Individuals can avoid under or overborrowing by determining the purpose and exact cost they will need to meet.
Besides these, individuals shall also look out for additional facilities like a pre-approved offer. These are extended by various reputed financiers to expedite the loan application process and minimize documentation. Such offers are available on loans against property and home loans. One can check their pre-approved offer by mentioning contact details.
To conclude, these factors will allow borrowers to enjoy hassle-free loan approval. But borrowers must verify the processing and prepayment charges before proceeding with a loan application.
