Banks, housing finance companies, and NBFCs offer secured loans against residential or commercial property, commonly known as Loans Against Property (LAP). Compared to personal loans or loans for businesses, the interest rates on these loans are lower. Besides, the payment is spread over a reasonable amount of time to make repayment easier.
Additionally, compared to other schemes, the loan amount approved for a LAP is much higher. Also, it is accessible to all, anyone with an existing property. You can apply for this loan option, regardless of whether you are a salaried worker, a self-employed person, or work in a professional or business environment.
These aspects of LAP make it a lucrative funding option for borrowers. If you are planning on availing this loan, then you must not forget to check these five key points beforehand-
- Rate of Interest
Loan Against Property interest rates depends on several variables, including your income, the size and term of the loan, your credit history, the type of property, and the lender’s policies.
These interest rates are important in your EMI payment, adding to the repayment amount.
Therefore, you must choose your lender wisely, comparing interest rates from several lenders. Compare the interest rates of various banks and NBFCs to ensure you receive a reasonably priced offer for your asset. A thorough analysis will help you secure long-term savings on loan repayments.
- Loan Amount
The value of the property you keep as a mortgage will significantly impact the amount of loan you can obtain. The lending institution (Banks, NBFCs, and HFCs) will assess the property’s market value per the current market rate before approving the loan.
Lenders will sanction loans up to 70% to 80% of the property’s value based on an evaluation and the correct documentation provided by the borrower. Therefore, you must research the property’s present market valuation to maximise your loan amount.
- Loan Tenure
The EMI amount decreases proportionally with the length of the term. However, a longer term will undoubtedly increase your overall expense as the interest rate compounds.
Therefore, it is advised that you select a shorter tenure to lessen the burden of interest. If you cannot afford a shorter-term loan, you should at least compare the interest rate of the Loan Against Property and choose the bank that offers the lowest rates.
- Loan Processing Charges
Following their terms and conditions, lending institutions charge loan processing fees between 0.50% and 4%. While some financial institutions charge you upfront before loan approval, others deduct it from the loan’s principal.
Under these processing fees, state-mandated fees consist of convenience fees, stamp duties, and a penalty prepayment fee of 1% to 4% if there is an outstanding loan payment (particularly if the prepayment exceeds 25% of the outstanding loan amount).
Apart from these charges, some creditors impose late fees for skipped EMIs, check bounce fees, duplicate repayment plans, checks to swap, and so forth. It is better to know these charges to ensure cost savings.
- Loan Eligibility Criteria
It is essential to confirm your eligibility before home loan apply online. The eligibility requirements typically consider your credit history, the number of hard inquiries, the timing of repayments, and other aspects of your credit history.
The lenders will also review your employment history and financial background to determine your capacity to repay the loan. Therefore, to lessen the chance of being turned down and get the loan amount you want, it is essential to understand the lender’s eligibility requirements before applying for a loan.
Conclusive Notes
Loan Against Property is a famous funding option people use to get money in times of need. However, several aspects are associated with this option that needs to be considered when applying for a loan.
The article thoroughly evaluates those aspects and puts forward a more transparent framework for loan application. Make sure you consider the abovementioned points before selecting a Loan Against Property.