Be it for your cherished academic degree, fairy-tale wedding, dream house or to begin a new life in a new city, our new ventures often require a sizeable amount of funding. For this, a loan against property is a fitting solution, as it offers ample funding and nominal interest rates.
One can avail of a loan against property for a number of reasons: to consolidate debts, fund major purchases, meet emergency expenditures, and so on. Typically, a loan against property can be repaid in equated monthly installments (EMI) over nearly 18 years. However, the tenor is flexible per your comfort. While a loan against property is not the only financial solution available, it is often the most viable option as it is comparatively less expensive than a credit card, and the disbursement is fast and seamless.
Loan against property can be used for any need and here are the top five aspects to consider before finalizing a deal.
A Strong Credit Score
Before you start applying for a loan against property, it’s important to know your credit score to ensure maximum eligibility. Lenders prefer applicants with strong credit scores, especially one that is higher than 750. When you have a history of clearing bills on time and honoring the terms of your past loans, lenders are more likely to extend favourable terms to you.
Applicants whose credit scores don’t match up the loan against property eligibility criteria, can consider applying the loan with co-applicants, making it a joint loan against property application.
Pre-/Part-Payment Charges and Facilities
A situation can arise when you need a loan against property immediately, but you know that you may soon have sufficient funds to pay that back. In such cases, you can opt to make frequent part-prepayments above your loan EMIs, to close the loan account faster and save on your interest accumulation.
Loan Amount and Tenor
Before availing of a loan against property, the most crucial factor is to know the amount you are eligible to borrow. Calculating the amount you need and comparing it to what you can repay comfortably is key. Using various loan tenor options with the proposed loan against property amount to calculate the EMI is a smart way to reach a more budget-friendly proposition. A loan with a relatively longer tenor means lower EMIs but increased interest obligations.
Property Loan Interest Rate and Other Charges
Once you have decided on the loan against the property amount, you should consider the interest rate next, that determines the cost of your loan against property. The loan against property interest rate is based on multiple factors, including your income, creditworthiness, the employer you work for, amongst other things. A lower interest rate can translate into smaller EMIs and, consequently saving you a significant amount in terms of interest. Besides, there may also be additional charges that a lending institution may even levy on a borrower. These include penalties or processing fees applicable on late payments or defaults.
Documents Required for Loan Against Property Assessment
Lenders require a few mandatory legal documents for mortgage loan approval. Some of these are as follows:
- Identity proof like voter card, PAN, Aadhaar, passport, driving license, etc.
- IT returns for the last three years.
- Latest salary slips, business proofs, and certified financial statements.
- Bank statements of salary accounts or active business accounts.
- Highest education qualification documents.
- Applicant’s property documents.
- Passport-size photographs.
The Final Word
Once you have made up your mind about the loan against property, make sure that you go ahead with only a trusted financial partner. You may come across loan offers with exceptionally low LAP interest rates. However, when you go through the fine print thoroughly, you may realize that there are other many hidden charges like processing fees or high pre-payment penalties if you try repaying the loan ahead of the chosen schedule. Ensure that you understand all the costs associated with a loan against property, before you sign the dotted line.