Are you aware that your property can be used as a resource in an emergency? Yes, you can obtain a loan against property using privately owned land, a house, or any other type of commercial property.
The lender uses the property as collateral and disburses the loan based on its current value and the borrower’s income to cover the amount borrowed. The borrower’s use of this money authorised by the loan is not subject to any limitations.
A loan against property is commonly used by people for home improvements, business expansion, medical expenses, sponsoring higher education, vacations, and weddings.
Let’s get right to the 5 crucial factors you must take into account before applying for a loan against property.
- A clear understanding of the lender’s eligibility criteria
Each financial institution has a specific set of criteria to determine the borrower’s eligibility for a loan against property. Lack of clarity regarding the eligibility requirements could result in a loan being rejected. It could also reflect as a hard inquiry on the borrower’s credit report and reduce their chances of availing the required loan amount. It’s therefore crucial to compare lenders and choose one that offers quality services after loan disbursal and efficient customer query resolution.
- The repayment tenure of the loan and the EMIs
Most institutions provide flexible repayment tenures of up to 20 years, which lower EMIs and raise loan affordability.
However, a longer tenure also entails higher long-term interest rates. It is advisable to balance the loan tenure and EMI payments. A shorter tenure is better from the viewpoint of saving on overall interest costs.
- Processing fees & other charges
Every loan against property is subject to processing fees that lending institutions charge as per their terms and conditions. Additionally, some lenders may charge service fees, prepayment penalties, foreclosure fees, convenience fees, and stamp duty charges that the borrower must pay in accordance with state fees to acquire the loan.
So, it’s crucial to factor in each one of those fees when estimating the true cost of getting the loan.
- The interest rate being charged
Different lenders may charge different interest rates on loans against property. They will vary depending on a number of factors, such as the borrower’s income, loan amount, repayment tenure, and credit history. Doing some research can help the borrower find a lender who will provide them with an affordable loan against property interest rate.
While small variations in interest rates might not seem like a lot, they could significantly impact the borrower’s ability to pay back the loan in the long run.
- The loan amount
The property’s market value is a major factor in determining the amount approved under a loan against property. The procedure starts with a property appraisal to determine the collateral’s current market value. It is followed by document verification to ensure the property is freehold, fully constructed, and has a clear title.
Following the valuation of the property, the borrower may be eligible for a loan up to 60% – 80% of its estimated market value.
A loan against property is thus an easy option for individuals and businesses looking to finance their life goals. It lowers the borrower’s financial burden, allowing them to put their property to good use. Many financial institutions offer affordable loan against property interest rates with flexible repayment terms.
Need urgent funds? Apply for a loan against property today!
