Loan

Factors to consider before taking loan against property

A loan against property is a secured advance where borrowers pledge their property as collateral to a lending institution. Then, they get a certain percentage of the property’s market value as a loan.

A loan against property is ideal for those facing cash crunches as it quickly provides substantial funds at an affordable interest rate. Moreover, financial institutions also approve these loans easily due to their secured nature. 

Whether you are paying for a child’s education, wedding, or starting a new business, you can avail loan against property to get a substantial amount at your disposal. However, before taking a loan,

it is advised to consider certain factors like credit scores, property value, or lender’s policies. These factors will influence the approved loan amount, interest rates, and tenor of your loan.

Factors to consider before applying for a loan against property 

Following are the crucial parameters that help you avail of loan against property conveniently. 

  • Ownership of the property

Before you apply for a loan against a property online, make sure to complete all paperwork for the ownership of the property at hand for the verification process. Lenders may not approve a loan request if the property used as collateral has disputes or its property papers do not clearly state the ownership. In addition, the property needs to have a clear and marketable title. 

  • Eligibility criteria

Due to its secured nature, loans against property have simple eligibility criteria. You will need to fulfil the age requirement for this credit as well. It also requires you to be an Indian residing citizen and have a steady source of income. To prove these,

you will need to have all the necessary documents, including address proof, identity proof, and income proof. Before applying for a loan against property, take a good look at the simple eligibility criteria to see if you qualify for it. 

You can look for an online loan against property eligibility calculator to know if you qualify for a loan. 

  • Check additional charges

Depending on the lender, loans come with additional costs like processing fees, service charges, stamp duty, etc. Additionally, some impose additional charges for prepayment, foreclosure, statutory charges, etc.,

which add to the loan cost. Hence, you should thoroughly calculate all the extra charges before applying for a loan. Otherwise, these small expenses can add up to affect your repayment capacity. 

  • Approved loan amount

A loan against property is provided against collateral; therefore, the loan amount approved would depend primarily on the valuation of the property and the LTV (loan to value) ratio. After you apply for a loan, the lender will send agents to appraise the property.

The final valuation will consider various factors such as the property’s age, location, infrastructure, geographical stability, residential/commercial status, etc. If you need a certain loan amount, knowing your property’s value and the LTV ratio of the loan will help. 

  • Interest rates

The interest rate on loan against property will depend on several factors such as the applicant’s income, credit history, loan amount, tenor, and lending policies of a financial institution. Hence, it’s a good idea to settle for a financial institution that offers the most affordable interest rates. It is also important to choose between floating interest rates and fixed interest rates.

  • Forecast your future expenses

Finding a loan against property with low interest rates is not enough if you have poor repayment capacity. Therefore, it is best to have a sound repayment strategy to ensure you can clear the dues even in unexpected circumstances. To make a sound financial plan for the future,

you can use an EMI calculator to figure out the ideal EMI for your income. It is also good to opt for a loan against property balance transfer facility to immediately reduce the interest burden. 

Selected HFCs also offer pre-approved offers that simplify and expedite loan processing. Such offers are available on various financial products like loan against property, home loans, etc. Check your pre-approved offer online by entering your name and contact number. 

These are some of the essential factors to consider before you avail loan against property. Eventually, it helps reap the benefits of this credit without heaving your finances. 

 

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