If you own a property and require additional funds, you can pledge it as collateral to apply for a loan. A loan against property or LAP loan is one of the most effective ways of financing your high-value expenses as it offers competitive interest rates and several other benefits for borrowers. Using your property to leverage the loan enables lenders to offer high amounts with minimum risks. However, there are several other factors that lenders consider before approving a loan against property application.
Loan against property or LAP comes with no restriction regarding end-use. That implies that borrowers can assign the loan amount to address any of their financial requirements such as financing marriage costs, funding higher education overseas, renovating or expanding business, home decoration, managing medical expenses, etc. Moreover, borrowers can avail 75-90% of the present market value of the property that can reach up to Rs.3.5 crore.
A loan against property may be used for business expansion, new assets, weddings, higher education, medical expenses or any other purpose as there is no restriction on the end usage of the sanctioned amount. Here are the most important things that you must consider before applying for your mortgage loan, so that you can seek the most favourable loan offers and meet your financial needs in a stress-free and cost-effective way.
Property details and valuation
A loan against property can be availed against commercial or residential property or even a plot of land with no constructions. You must ensure that all property paperwork is in place with clear titles and ownership documents, which the lender will verify before approval. The property must also be insured with all policy papers up to date. If you co-own the property or land, then both owners need to co-apply for the loan.
Loan against property is a variety of secured loans that can be availed through a mortgage of a commercial or residential property. Both salaried and self-employed individuals who need substantial funds to meet their high-end expenses can avail home mortgage loans.
The bank or the financial institution will appraise your property and the approved loan amount will depend on the loan-to-value ratio. As a practice, lenders approve between 50% to 70% of the prevailing market value for the loan amount, though this may differ as per different lenders’ policies. The market value will vary depending on the age, condition, size, and location of the property.
Hire the Freelance Content Writer today for getting the high quality content.
Loan eligibility parameters
Meeting all the eligibility criteria for the loan is imperative for faster approvals and disbursals. The eligibility terms for home mortgage loans vary across different lenders. You can compare the different offerings and opt for one with the most favourable terms and conditions. Your eligibility is affected by your credit history, property, income details, and age. While considering whether you qualify for the loan, you also need to consider the lender-specific parameters.
Credit rating and score
Credit history helps lenders in assessing the risk of offering you a loan. It reflects whether you have been paying your dues on time and if you have previously defaulted on any payments. To qualify for a loan with an attractive loan against property interest rate, a credit score of 750 and above is essential. You can avail of a loan with lower scores, but expect high interest rates to offset that risk.
Loan processing and prepayment
Part-prepayment enables you to pay a lump sum towards your outstanding principal. If you receive sudden funding like a bonus at work or an inheritance, you can make the part-prepayment to decrease your overall outstanding principal. Paying a large portion of the principal reduces your EMIs significantly, ensuring that you are making cost-effective and affordable monthly payments for your loan against property. Some lenders charge a part-prepayment fee, although not all. Loan processing charges vary across lending institutions, and it is important to learn about these charges by comparing loan offers by different lenders.
Interest rates and additional charges
The key component of home mortgage loans is the interest rate. Lenders will consider your property, your employment history, and the loan-to-value ratio based on the current market value to offer you a favourable interest rate for your LAP loan. The institution can also charge additional fees, such as EMI bounce charges, interest and statement fees, EMI penal interest, and secure fee. These charges vary across lenders.
Eligibility for tax exemptions
Tax benefits are available for both self-employed and salaried individuals, although it depends on the end use of the funds. For instance, you can claim tax benefits on the property loan if the loan amount is applied to your business, as per the Income Tax Act, Section 37 (1). The exemptions will be on the interest paid, the processing and documentation charges. If you are a salaried professional, then, under Section 24 (b) of the Income Tax Act, you can claim benefits if you used the loan amount to finance a property deal.
With a better understanding of the nuances of the LAP loan, you can make the right decision about which loan offer is the best for you. If you’re looking for a loan with simple eligibility criteria and other attractive features, you can opt for the Bajaj Housing Finance Limited Loan Against Property. An affordable loan against property interest rate and long repayment tenor ensure that your monthly payments are convenient and hassle-free. Your approval is quick with fast disbursals when you qualify for the LAP loan. It is an ideal solution for your urgent and planned requirements and is tailored with advantages to make borrowing a great experience. To get the best deal with swift processing for your needs, apply online.
Get Business Advice Write For Us Category in your blogging list.
