A LAP or loan against property is a type of secured loan that allows an individual to obtain a sizable loan amount while keeping their immovable asset as collateral. It has become one of the most popular credit facilities due to its no end-to-end restriction, low LAP interest rates and other benefits. An individual can get as high as 40 to 70% of the property’s current value as a loan.
In this article, we are going to discuss the 7 critical factors individuals must know before applying a LAP.
Top 7 factors to know before applying for a loan against property
Willing borrowers must know the following factors that affect a loan against property in India:
The loan amount one wishes to borrow
Depending on the lending institution’s terms, individuals looking forward to applying for a loan against property can get as high as 40-70% of the property’s value. Nevertheless, one should do thorough research; compare the loan amount given by different lenders, and settle down for the best option.
Loan repayment tenor
Although maximum financial institutions offer LAP for a long repayment tenor due to its secured nature. However, one should keep in mind that opting for a higher repayment tenor increases the LAP interest rates and leads you to paying more.
Loan against property interest rate
One should also consider the loan against property interest rate at which the lender is disbursing the loan amount. The interest rate charged by a lender depends on several factors, such as an individual’s income, repayment tenor, credit history and the financial institutions’ terms. Potential borrowers should do thorough research and choose lender that offers the lowest interest rates. Further, one can use a LAP EMI calculator to check their monthly instalments before applying for this credit facility.
Processing fees and additional charges
Individuals often should also consider the additional charges that come hand in hand with the total cost of a loan. These charges include prepayment charges, service charges, statutory charges, foreclosure fees and stamp duty. Although these costs vary from lender to lender, yet applicants must keep track of these additional charges and manage their finances accordingly.
The eligibility criteria from lender to lender. However, certain basic factors remain unchanged, such as the borrower’s income, the market value of the mortgaged asset, debts and repayment record. Besides, the eligibility criteria include employment status, credit score, age and income status.
Most financial institutions ask a borrower to produce some basic documents for a loan against property. However, willing borrowers should always check the required documents for availing a LAP.
- Availability of tax benefits
Since a mortgage loan does not have an end-use restriction, candidates can claim tax benefits in case the borrowed sum is used for business purposes. A borrower can claim the benefits on the interest paid for a loan against property under Section 37(1) and 24(B) of the Income Tax Act of 1961.
After checking these factors, willing borrowers can approach their preferred financial institution and opt for a loan against property. Candidates can use the borrowed loan amount to fund their personal and professional expenses without any restrictions.
Besides using the loan amount for business and personal needs, one can also utilise a loan against property to fund educational expenses. A LAP is one of the best options for those who want to go abroad for higher studies. Willing candidates can choose this option for their children’s higher education purposes.
Several reputed financial institutions, like Bajaj Finserv, offer pre-approved offers on various financial products, such as loans against property, home loans, etc., to make the lending process easy and hassle-free. Interested individuals can enter their names and contact details on the website of their preferred lender to check their pre-approved offers.This is all individuals need to know before applying for a LAP. Besides, willing borrowers should check the factors mentioned above before approaching their financial institutions for this credit facility. One can also use the various online calculators available on a lender’s website to know their EMIs and manage their budget accordingly.