Things To Take Care of While Applying For a Loan Against Property
A loan against property is a secured loan that is offered against property, whether the property is residential, commercial or industrial. Until the entire sum of the loan secured is repaid, the lender continues to hold the property as collateral. Loans secured by property are typically available from banks or other financial organisations at substantially lower interest rates than unsecured loans. If you considering applying for a loan against property, this article covers the loan against property eligibility requirements and other important aspects such as the loan against property interest rates and more.
Loan Against Property Eligibility Requirements
These are the loan against property eligibility requirements for those who are salaried and self-employed that you will have to carefully go through before you apply for a loan:
| Requirements | Salaried | Self-Employed |
| Age | Between 21 and 60 years | Between 25 and 65 years |
| Work Experience | A salaried individual working in an MNC, the private sector, or the public sector | A self-employed individual with a regular source of income |
| Resident | A resident of India | A resident of India |
| CIBIL Score | 750+ | 750+ |
| Documents Required | Identity proof documentsAddress proof documentsLast 2 years’ income tax returnsKYC documents.Form 16Last 6 months’ bank statements and salary slipsDocuments for the property given as collateral | Identity proof documentsAddress proof documentsLast 2 years’ income tax returnsKYC documents.Form 16Last 6 months’ bank statements and salary slipsDocuments for the property given as collateral |
Loan Against Property Interest Rates
The loan against property interest rates vary from one lender to another. Mostly the interest rates range between 8% to 25%. Before applying for a loan against property, it is important to research multiple lenders since each will have different interest rates. Once you have decided on a lender, double-check the interest rate since this will have a direct impact on your EMIs.
8 Things To Consider When Applying for a Loan Against Property
If you have decided to apply for a loan against property, here are 8 important things to consider before you make your application:
1. Determine the Value of the Property
As the name implies, a loan against property is given against property (either residential or commercial), which the lender retains as collateral. The evaluation of this property will determine the loan amount you are qualified for. Depending on the property’s size, age, location, features, etc., its value may change. Banks issue a loan amount between 60% and 80% of the property’s market value after considering all the criteria. As a result, to qualify for the loan amount for which the property is pledged, a borrower must be aware of the property’s value.
2. Examine Your CIBIL Score
A CIBIL score is a three-digit number representing your credit repayment history. It provides information to the lender regarding how promptly you have paid loan EMIs in the past. If your CIBIL score is 750 or higher, the bank is more likely to approve your loan against property application. Banks may, however, immediately reject a loan application that has a low credit score.
3. Obtain an Estimation of the Loan Amount You Require
When it comes to a loan against property, lenders will provide you with up to 80% of the value of the property, but you must assess your actual need. Make a list of the expenses that you need money for so that you can get a loan against property for the exact amount that you require.
4. Compare Interest Rates of Different Lenders
Do not rush to apply for a loan against property with the very first lender you come across. In addition, applying for a loan with a bank where you already have an account is not compulsory. Loan against property interest rates will determine what your EMIs will be. Therefore, always compare the loan against property interest rates of different lenders and choose the lender that offers the lowest interest rates.
5. Research the Lender’s Eligibility Criteria
The loan against property eligibility criteria differs according to each lender. For instance, Lender A might make a loan against property available to anyone over 21 years old. Lender B, however, might only favour lending to people over the age of 25. Similarly, different lenders may have varying requirements regarding minimum income, documentation, work experience, etc. Therefore, be aware of the lender’s eligibility requirements to reduce the possibility of a loan being rejected.
6. Consider Your Loan Repayment Capacity
Before applying for a loan against property, you must evaluate your ability to repay the loan. You can make a budget using all of your sources of income and outgoing costs to determine an expected instalment payment that will allow you to meet all of your financial obligations. You can calculate EMIs based on your preferred repayment schedules using online EMI calculators.
7. Repayment Tenure and EMIs
The repayment tenure of a loan against property varies from 15 years to 30 years. Your EMIs will be more manageable if you choose a longer repayment period, but during this time you will be paying interest rates for a longer period. With a shorter term, you will have a lower interest rate, but your monthly EMI payments will be higher. Thus, choose a tenure that fits your ability to repay the loan.
8. Consider the Processing Fees and Other Charges
When you submit a loan against property application to a lender and it gets accepted, the lender may charge you a processing fee that typically ranges from 1% to 4% of the loan amount plus GST. Aside from that, some banks may charge prepayment fees and even have stamp duty costs. You must find out about all of these additional charges to accurately assess the loan’s true cost and make an informed choice.
Conclusion
A loan against property is a secured loan offered against collateral. Before applying for a loan, assess the value of the property that is going to be given as collateral and make sure that you meet all the loan against property eligibility requirements for instant loan approval. Always compare the loan against property interest rates of different lenders and choose the one that offers you the lowest interest rate. It is also important to keep track of all your sources of income and expenses and then decide the loan amount you want to borrow.
By considering all these important points, you can make sure your EMIs are manageable and that you will be able to repay your loan on time and keep your property secure. Visit Piramal Finance for more information on how to apply for a loan against property.