A loan against property is among the most sought means of resolving financial crises. Borrower-centric features such as low-interest rates, flexible tenor, and no end-use restrictions have helped LAP garner significant popularity among all.
Things to know about loan against property
Gaining an insight into these pointers proves useful for intending LAP borrowers:
- Evaluation of the property
Individuals can take a loan against property against a residential or self-occupied property. The borrower needs to be the lawful owner of the property. Additionally, properties that qualify for a LAP are:
- Commercial buildings
- Residential buildings
- Piece of land
Furthermore, if several borrowers own a single property, all legal owners will have to apply for a loan against the said co-owned property jointly.
When a lender receives a LAP application, it employs an appraiser to compute the property’s market value. After evaluating the property, the lending institution sanctions only a percentage of the property’s value as loan. The value usually ranges between 75% and 80% depending upon the lender.
Additionally, the financial company evaluates several other aspects such as property’s location, age, purpose, and condition.
- Loan-to-value ratio (LTV ratio)
Prospective borrowers must assess different lenders in terms of LTV ratio to seal a good deal. LTV is the amount of loan that a lender approves against the evaluated market value of a property in question or land.
The loan against property LTV ratio varies from lender to lender and is attributed to the various ways and norms of evaluating an asset’s value.
Furthermore, financial institutions are reluctant to offer a higher LTV for commercial properties. This is because they think that individuals are more likely to save their residential property when compared to commercial property.
- Eligibility criteria
Most financial institutions require applicants’ to meet these loan against property eligibility criteria to qualify for LAP:
- Applicant’s income
- CIBIL score
- Applicant’s age
- His/her employment status
- Property’s market value
Generally, lenders prefer borrowers to be repaying the loan amount while still being employed. This is why the maximum age eligibility for salaried professionals is 60 years, and that for self-employed individuals is 70 years.
- Tenor, interest rate and EMIs
The loan against property interest rate also varies from lender to lender. To determine the overall cost of borrowing, individuals must find out the additional charges as well,
Typically, a loan against property’s repayment tenor can range up to 20 years, depending upon the lender. Intending borrowers can use an online LAP calculator to determine their monthly instalments in advance and plan loan repayment better.
Furthermore, leading financial institutions also provide pre-approved offers to smoothen the loan application procedure. Such offers are available on home loans and loans against property, among others. Also, the process to check such offers is extremely easy. Individuals need to enter their name and contact details to check their applicable pre-approved offer.
In addition to these, individuals also need to check the steps involved in the application process to streamline it smoothly.
How to apply for a loan against property?
Individuals can reach out to their preferred lender or opt to apply for a LAP online. Notably, the process to apply for a LAP online is extremely simple.
Follow these steps to apply for a loan against property:
Step 1: Visit the lender’s official website and fill up a LAP application form.
Step 2: After verification, the applicant will receive a call from a customer representative.
Step 3: The approval process is concluded. Note that the approval time varies from lender to lender.
Step 4: The last step is to submit all the required documents.
Subsequently, the finalised loan amount is credited to the applicant’s account at the earliest. The timeframe within which the sanctioned loan amount is disbursed depends on the lender.A loan against property is one of the best ways for individuals to address their financial needs. However, like any other loan, default in repayment can impact a borrower’s creditworthiness. Therefore, borrowers must assess their repayment capacity and understand all about LAP before proceeding forward.