Applying for a Loan Against Property (LAP) is a big decision, and it should be taken in a hurry. If you are considering applying for a property loan, you should understand a few things before going through the application process.
Taking a Loan Against Property is easier than other forms of loans because it is a secured loan where you pledge your property as collateral.
However, you would require a fair understanding of the process – eligibility, document requirements, and more.
Read on to learn more.
What is a Loan Against Property?
A Loan Against Property is typically availed against a property; it can be a commercial building or your own home. The loan is repaid over the years with monthly interest payments. It is used for business or investment purposes but can also be used for personal purposes.
A Loan Against Property scheme allows you to secure a personal loan by pledging your property as collateral. The loan amount can be up to 65% of the property value for the tenure can be up to 15 years.
The Loan Against Property interest rates can range from 9.65% to 11.85% per annum.
Here are the three important things to consider when it comes to a Loan Against Property.
First and foremost, you must ensure you’re eligible for a Loan Against Property. This usually means having a property worth at least as much as the loan you seek.
Educating yourself on the eligibility criteria is important when applying for a loan to increase your chances of being approved for the amount you need. Moreover, meeting the requirements improves your odds of getting your loan processed.
LAP Eligibility Criteria
- Whether you are a salaried employee or a self-employed professional/non-professional, in either case, you will need proof of a regular monthly income to pay the EMIs.
- You should not be over 65 years of age during loan maturity
The credit score is a good indicator of an individual’s credit history. It is a number that reflects your repayment history and is used by lenders to decide the interest rate for your Loan Against Property.
Having a credit score that is on the higher end would indicate that you are a trustworthy borrower with less risk, which could lower your Loan Against Property interest rate. If you have a healthy credit score of 750 or above, you’ll get a LAP at a lower interest rate and may be able to negotiate other terms and conditions with the lender.
If your credit score is on the lower end, the lender may not offer you a loan, or you may get it at a higher interest rate, forcing you to pay a higher amount in EMIs.
Apply for a LAP without hesitation if your credit score is healthy!
The Loan Against Property interest rate significantly impacts your EMI and your ability to pay it over the entire repayment tenure. The higher the interest rate, the more you have to pay back.
Use an EMI calculator online to plan your loan so you can prepare yourself for the repayment.
To Wrap Up
Look for loans with flexible repayment terms. This can make repayment easier and help you pay off the loan faster. Be aware of additional fees from lenders. Some lenders may charge extra fees on top of the interest rate.
A Loan Against Property has no restrictions on the end use of funds. It is a great way to meet your financial needs. The benefits of competitive interest rates, long tenors, and easy balance transfer options make it a very attractive option.