From meeting your medical expenses, renovating your home or even travelling to your dream destination, whenever you need funds, getting a secured loan can be a good option. A loan against property (LAP) in India offers you a flexible option to borrow funds against your property as collateral. All you need to do is check your loan against property eligibility, apply for the right amount and get approval.
However, while this is an easy process and can be undertaken independently by anyone, experts recommend you consider some tips while availing a loan against property. It will help you finish the loan application process faster and get funds at the best affordable terms.
What is loan against property?
A loan against property is a type of loan that allows the borrower to obtain funds by mortgaging the property with the lender. It is a cost effective way to meet your financial needs, whether it’s personal or professional. Since the property (residential or commercial) is your collateral, the amount you get can be significantly higher at a considerably lower interest rate. The loan amount sanctioned against property depends on its market value and location. Most lenders provide up to 60% – 80% of your property’s current market value as a loan amount.
Tips while availing a loan against property
There are several things that one needs to consider before applying for the loan. Here are the crucial factors that you need to consider while applying for this type of loan:
- Evaluate your eligibility
Different lenders may have different criteria for loan against property eligibility. You must fulfill the eligibility to avoid your application rejection. You can compare lenders based on their loan against property eligibility criteria and opt for a lender who has easy eligibility.
- Check your credit score
Your credit score offers the lender a quick summary of your creditworthiness and loan repaying capacity. The higher your credit score (ideally between 750-900), the better are the chances of your loan application getting approved with favourable terms like tenure and interest rates.
- Calculate your repayment capacity
Before taking any kind of loan, you must check whether you will be able to repay the amount within the tenure. For this purpose, calculate all your income and expenses to estimate how much EMIs you can easily pay every month without putting a strain on your finances.
- Ensure your documentation is in place
The loan against property process is finally complete once you submit your documents stating the ownership of the property you are seeking a loan against. Ensure that it is not disputed, and you have the legal authority to borrow funds against it. Once this is verified, the loan amount would be credited to your account by the lender.
In a nutshell
The property you own adds value to your net worth. Borrowing against property can be a great way to ensure your financial stability and get the money you need to fulfil your needs and wants. But it is always best to do your research before applying.