Your property is a valuable asset that you can use to finance expensive needs like weddings, home improvements, business expansion, and other big-ticket items. The best option is a Loan Against Property (LAP) if you need extra cash without depleting your savings. People typically choose Loan Against Property (LAP) when they have significant financial needs. But is this the best loan for your circumstances? You will discover what an LAP is in this article and what to keep in mind before submitting an application for a loan against property.
What is a Loan Against Property?
A Loan Against Property (LAP) is a secured loan sanctioned against an asset like land, a house, or a commercial property. The lender keeps the asset as collateral until the entire loan amount is repaid. LAP’s interest rates are generally lower than unsecured loans like credit card debts. As a secured loan, the lenders consider it low risk as they can claim the property if the borrower fails to repay the loan.
5 Major Factors to Consider Before Applying for LAP
- Know Your Property Valuation
Before applying for a Loan Against Property, the property must be valued to understand the market value of the property. It will help you to determine the loan amount and eligibility. Generally, financial institutions evaluate the property based on its age, locality, amenities it offers, etc. If your property is in good condition, the chances of loan approval are higher.
Once you know the value of your property, move forward with your research to choose lenders with a high loan-to-value (LTV) ratio. In India, you can get around 75-90% of your residential property value as the loan amount. - Estimated Loan Amount You Need to Borrow
As a borrower, you must know the required loan amount before applying, especially when you want to keep your property as collateral. Having an estimate makes it easier to borrow the required loan amount. To understand your required loan amount, you need to make a budget for yourself with a list of existing and future expenses. This will help you repay the loan without any additional financial burden.
For example, if you are taking an LAP for home renovation, calculate the renovation expense while adding the cost of new furniture, amenities, etc. Once you have the list, review your monthly income and other expenses. Doing so will help you get clarity on the loan amount you require. - Loan Repayment Tenure
Generally, lenders offer longer and flexible repayment tenure for Loan Against Property. Alongside, various features of Loan Against Property make it an ideal choice for borrowers. The loan tenure of LAP ranges from 3 to 15 years. If you choose a longer-term loan, the EMIs will be affordable, but you will pay the interest for a longer period. On the other hand, if the tenure is shorter, the EMIs will be relatively higher.
Consider your monthly income and expenses to select your appropriate loan repayment tenure. Today, the majority of lenders offer an EMI calculator on their website. It is a useful tool for borrowers to calculate EMI before applying for a loan and plan their loan smartly. - Know the Eligibility Criteria
The eligibility criteria for a Loan Against Property differs from lender to lender. Knowing it helps eliminate the chances of loan rejection. Also, it enables you to get the loan amount faster as you already fit the criteria. Keep in mind that every time you apply for a loan, your credit score gets affected. So, do your research and apply only if you check all the requirements for a loan application. - Compare Different Lenders
In India, there are various lenders that offer LAP, including banks and NBFCs. It would help if you did your research to determine which lender offers you the best terms. For example, the interest rates, processing fees, LTV ratio, etc., differ from lender to lender, so consider everything before applying for Loan Against Property.
Conclusion
Unlock the potential of your property with a Loan Against Property, a smart and effective way to leverage the property’s value. This has no restrictions regarding its usage; it is a great option for any financial requirements. However, it is also important to remember the above-mentioned things before you apply for a Loan Against Property. This will ensure you make the most out of your loans and have a smoother loan process.
You can apply for a Loan Against Property with Credit Success as a borrower. By providing your residential, business, or commercial property as collateral, you can get a high loan amount that can be used to fund your personal or business-related needs. You can easily apply for the loan online and have to fulfil only a few basic requirements. So you can get your loan approved and disbursed quickly.
Frequently Asked Questions About Loan Against Property
- Can you get a 100% loan against the property?
As per official guidelines, the maximum amount can be 75 to 90% of the property value if the amount is less than or equal to ?25 Crore. - Is it OK to take a Loan Against Property?
A Loan Against Property is a popular form of mortgage loan in India. It is a great option for borrowers looking for a large amount of money by providing their property as collateral. - What is the advantage of a Loan Against Property?
The primary advantage of a Loan Against Property is its lower interest rate as it is a secured loan. The other benefit is that you still have ownership of the pledged property.
