What Are The Key Things To Remember Before Taking A Loan Against Property

A Loan Against Property (LAP) is a type of loan where you pledge your property, such as a house or land, as collateral to borrow money from a bank or financial institution. The loan amount is usually a percentage of the property's market value, and the property ownership will be with you during the loan tenure. The best part is? LAP can be used for various purposes like business expansion, education expenses, or other personal financial needs. If you fail to repay the loan, the lender has the right to sell the property to recover the loan amount.

But one question you might have is what are the key things to remember before taking a loan against property? Let’s understand!

1. Repayment Tenure

You know that LAP is a secured loan and offers a repayment of up to 2 to 20 years for salary and 2 to 18 years for self-employed. Choosing the tenure completely depends on your financial obligations, investments, expenses and many other things. But one thing to remember is if you choose a long term period your per month EMI will be low but you will end up paying a higher interest rate. On the other hand if you choose a shorter tenure your EMI will be high per month but overall you will be paying a low interest rate in future. So, it’s a better idea to use Online EMI Calculator for your better understanding.

1.Interest Rate

An interest rate on LAP is an additional cost that you will be paying to the lender at the end of every month called EMI (It includes both principal and interest) The interest rate can be dependent on many factors such as your age, income, CIBIL score, current expenses and others. Check the interest rate and other things here hasslefree: Check here

Important note: Interest rate generally starting from 8.50% to 18% p.a

2.Valuation of property

The total loan amount that you will get totally depends on the value of your property. Let’s say if your property is valued at 80 crore and you are taking a loan of 1 crore in this case the bank will reject the application. Lenders check every detail about the property to find out the value such as property age, location, amenities and many other things. After evaluating the valuation lender gives a loan amount up to 80% of the property’s value.

3.Credit Score

CIBIL Score is a really important factor to consider when you are applying for a Loan against property. If your CIBIL Score is low (below 600) then many lenders will hesitate to give you a loan. If your score is above 750+ (This is preferred for most of the lenders) then more chances for getting approval for the loan. It’s really important to check the score

What a free credit score check? Click here

Below are the details for your better understanding:

5. Additional Charges

Apart from the monthly EMI, lenders charge various fees such as administrative fee, insurance, processing, legal, pre-payment charges, and many others. It’s important for you to check the hidden fee and calculate your total cost.

6. Understand the eligibility criteria

Each lender has specific eligibility criteria for loan against property. If you only meet these criteria then lender will approved the loan

Common Eligibility Factors:

• Age: Typically, applicants should be between 21 and 65 years old.

• Income: A stable and sufficient income to repay the loan.

• Property Ownership: Clear ownership and title of the property being mortgaged.

• Credit History: A good credit score and credit history preferred 750+

7. Understand the repayment capacity and EMI

You will easily get a loan if you have a good credit score, income and other things but before applying for LAP, you need to evaluate will you be able to pay the EMI monthly? If yes, then go ahead. If no, then there will be a risk of losing your property if you don’t repay the loan.

8. Understand what are the documents required

Lenders require a set of documents to process a loan against property application. Having these documents ready can accelerate the approval process.

Commonly Required Documents:

1. Identity Proof: Aadhaar card, PAN card, passport, etc.

2. Address Proof: Utility bills, ration card, voter ID, etc.

3. Income Proof: Salary slips, bank statements, ITR, etc.

4. Property Documents: Title deed, sale agreement, property tax receipts, etc.

5. Credit Report: Recent credit score and credit history report.

6. Calculate an estimate amount you need to borrow

Before applying, calculate the estimated amount you need to borrow. Borrowing more than necessary can increase your financial burden, while borrowing too little may not meet your needs.

Factors to Consider:

• Purpose of Loan: Clearly define why you need the loan and how much is required.

• Current Obligations: Consider your existing debts and obligations.

• Future Expenses: Plan for future financial commitments and emergencies.

Summary

Conclusion

Deciding to take a loan against your property is a big step that needs careful thought and planning. It's important to understand things like how long you have to pay it back, the interest rate, how much your property is worth, your credit score, any extra fees, who can get the loan, how much you can afford to pay back each month, what papers you need, and how much you can borrow. Knowing all this helps you pick the right loan for your money needs.

How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.

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Need help? Reach out at support@eazybankloan.com

Frequently Asked Questions (FAQs)

1. What is a loan against property?

• A loan against property (LAP) is a secured loan where you pledge your property as collateral to secure funds for various financial needs.

2. How is the loan amount determined?

• The loan amount is typically up to 80% of the property's current market value.

3. What is the repayment tenure for LAP?

• The repayment tenure for LAP can be up to 20 years, depending on the lender and the borrower's financial profile.

4. Are there any tax benefits on LAP?

• No, there are no tax benefits on the principal or interest payments for loans against property.

5. What happens if I default on the loan?

• If you default on the loan, the lender has the right to seize and sell the property to recover the outstanding amount.