Posted by Are you looking to fund your child’s education or marriage? Do you need funds to expand your business? Don’t worry, one can arrange money for all such goals using the facility called Loan Against Property. This facility is offered by almost all banks and NBFCs these days. You can lookup for personal loans from NBFCs. If you own a property, be it residential or commercial or even a piece of land, you can avail of a loan against property or LAP. A loan against property in India is a secured loan.
In this type of loan, an individual pledges their residential/commercial property to the lender as collateral. Since real estate is a high-value asset, the banks are at a lesser risk and hence, are able to extend loans at not just lower interest rates than compared to unsecured loans but also for longer tenors going up to 20 years.
Loan Against Property Eligibility
It is necessary to understand your eligibility and keep all documents ready before opting for LAP to avoid any rejection or delays in the loan process.
Repayment Capacity
Opt for a loan amount that will be comfortable to repay. Before applying for a loan against property, it is better to understand your capacity to repay the loan amount. EMIs add convenience to life and allow us to fulfil all our goals. However, when taken in excess, they also force us to compromise on long-term financial objectives like retirement planning. As loans against property are long-tenor loans, it is extremely important that you borrow an amount that you can repay easily, even if you suffer a couple of setbacks on the way. The loan against property EMI calculator is a great tool available online that gives one the flexibility to evaluate the right mix of the loan amount, interest rate, and tenor. Home loan EMI calculator uses have many benefits.
CIBIL Score
There is no doubt that a secured loan like LAP is a better substitute for an unsecured personal loan. However, one must also be aware that having a property alone isn’t going to get you a loan on good terms. Factors, such as regular income, outstanding debt, and history of repaying those on time, are equally crucial factors. Your CIBIL score is the most reliable and accurate description of all those factors.
Apply for a big-ticket loan like LAP when your CIBIL score is above 750 points to get the best offers and register lower chances of rejection on your application. For those seeking to apply for a loan against property without income proof, applying with a co-applicant who has regular income flow and good creditworthiness is a good idea.
Compare Before Picking a Lender
Just like before buying a car, home or any electronic gadget, it is important to do some background research about the pros and cons of the product or an asset, same should be the mantra for applying for a loan, particularly a big-ticket loan like LAP. With so many lenders out in the market competing against one another for market share, it is important that you go with the institution that is offering the loan on the most competitive interest rates with the lowest charges (like processing fees). You can compare loan offers by visiting the webpage of the specific lender/s you have identified. This can be done without affecting your credit score.
Read the Fine Print
Don’t just get lured by the higher loan amount, lowest interest rate, and maximum loan tenors that lenders are willing to offer you on LAP. While making comparisons online, go through all the terms and conditions applicable on your loan, particularly clauses related to late payment penalties, foreclosure, processing fees, administration, and other additional charges. Ensuring that these charges are minimal and in line with what competitors have to offer, will reduce the overall cost of your LAP.
Shorter Tenor and Timely Repayments
One of the key advantages of getting a LAP over an unsecured personal loan is that LAP comes with long tenors, i.e. anywhere between 5-20. A longer tenor considerably reduces a person’s EMI burden. However, remember the longer the tenor, the more you will end up paying in interest to the lender. If you are unable to afford higher EMIs now, then go for the longest possible tenor, but make sure as your income grows, you increase your EMIs and reduce the tenor of your loan. Another important thing you need to ensure is that your bank account has enough balance close to the EMI due dates to avoid default or delay in the EMI payment. Non-payment will attract penalties, and will adversely impact your credit profile or CIBIL score. In other words, your ability to seek a loan in future.
Insurance
When opting for a bigger loan amount, such as a loan against property, it is always better to take insurance on your loan amount. The insurance protects your family from bearing the burden of unaffordable debt, in the event of your demise or serious accident. Typically, lenders offer an insurance cover with an amount equal to your liability or outstanding loan amount. However, you can also opt for a normal term insurance plan of the amount that more than covers all your existing liabilities.