Make the most of your increased property value by taking out a loan against it
A financial institution will consider the present market value of the pledged asset as a crucial factor to determine the disbursal fund for a loan against property application. Therefore, an increase in property value can help a borrower avail of a sizable loan amount in a secured line of credit.
Why opt for a loan against property?
There are several reasons why availing of a LAP can benefit a borrower in the long run. Some of these include:
- Lower rate of interest
The current interest rate on property loans offered by several financial institutions is low. So, an applicant is not likely to face the risk of defaulting on his or her monthly instalment. Additionally, it will also curtail the total repayment outgo of a borrower.
- A longer repayment tenor
As this form of credit acquisition is secured by a collateral asset, the risk factor on the lender’s end reduces significantly. Therefore, financial institutions generally offer a longer loan repayment tenor to their borrowers.
This extended repayment tenor can significantly reduce the financial burden of a borrower. To elaborate, such a long span automatically reduces the cost of monthly instalments one has to pay during the tenor. As borrowers do not have to pay a hefty EMI, they can subsequently avoid defaulting risks that negatively affect their CIBIL scores.
Maintaining a good credit history is also vital for a borrower to meet the eligibility criteria to avail a loan against property. Additionally, the financial institutions extend pre-approved home, and property loan offers to their existing borrowers if they meet or surpass the eligibility parameters. So, a borrower can check out the pre-approved offers available by providing their names and contact details in the required field of their lender’s website.
- No end-to-end usage restriction
When an applicant is availing of a loan against property, he/she can use the borrowed sum to fund any kind of expense. Moreover, applicants can use the money for big-ticket expenditures as they can avail of a comparatively larger sum via this debt instrument.
- Faster fund allocation
A borrower often applies for a loan against property for emergencies like a medical exigency, marriage, etc. Hence, a faster credit amount disbursal becomes pivotal.
- Property loan tax benefits
There are two sections of the Indian income tax laws that can be beneficial for a borrower when availing of a loan against property. Section 24(B) states that a salaried borrower can have tax deductions on property loan interest payments for up to Rs. 2 Lakh if the credit amount is used to fund a new residential home.
On the other hand, provisions under Section 37(1) allow a borrower to claim tax benefits on interest paid and other charges associated with a LAP used for business expenses.
- No prepayment charges
If a borrower is availing of a loan against property at a floating interest rate, he or she will not need to spend any additional amount for foreclosure and prepayment purposes.
Property loan eligibility criteria
An applicant must ensure he or she meets the parameters set by a lender to avail of the desired loan amount.
Although these eligibility criteria may vary from one financial institution to another, some of the basic requirements include the following:
- The borrower will need to be a residing citizen of India
- A salaried applicant must be under the age of 28 to 58 years
- Self-employed borrowers have to be under the age group of 28 to 70 years
- A salaried applicant must have spent at least three years in his or her current MNC employer or public/private firm
- Business owners should have a record of this enterprise having at least five years of vintage
How to apply for property loan?
To apply for property loan online, a borrower can adhere to these simple steps:
Step 1: Open the lender’s website
Step 2: Open the application form for LAP
Step 3: Input necessary personal and financial details
Step 4: Recheck the provided information and click on ‘Submit.’
Subsequently, representatives of the lenders will get in touch with the applicant. The borrower will then need to submit the necessary records and paperwork to access formal credit from his or her financier.
To sum it up, one should check the market value of the property they will keep as collateral while opting for a loan against property. This will allow the borrower to get an idea about the maximum amount he/she will be eligible for.