The Reserve Bank of India’s decision to slash the repo rate by 40 bps can have a direct impact of a reduction in the loan against property interest rate, among other loan types. Moreover, the low-interest-rate can further encourage individuals to borrow a property loan to fund their personal and business financing needs adequately.
Regardless, there are several things that an intending borrower must become aware of to make the most of this secured loan option. To begin with, they should find out about the features along with the conditions which have to be met to avail a substantial loan value successfully.
Things to Know about Loan Against Property
These following pointers highlight the most prominent features and associated benefits of a loan against property.
High loan value
Most financial institutions offer up to 80% of the mortgaged property’s current market value as the loan amount. In some cases, self-employed applicants may secure up to Rs.3.5 crore as a loan value to fulfill their funding requirements accordingly.
As against many other credit types, lenders do not put any restriction to end-use on the amount availed as a loan against property. Borrowers can thus use the loan amount so availed to meet any of their personal or business requirements effectively.
Low rate of interest and prepayment charges
A loan against property comes at a lower rate of interest than many other advances, which helps borrowers to repay their debt affordably. However, one can further strike a deal to lower the loan against property interest rate by taking steps to enhance their CIBIL score along with making a higher down payment and providing proof of higher income.
Most financial institutions offer a loan against property at a flexible tenor, which may extend up to 20 years. It helps applicants to pick a tenor that matches their repayment capacity and makes EMI payment more affordable.
Nonetheless, they must understand that the relationship between the length of tenor and interest payable as per the property loan interest rate is directly proportional. To understand the relationship better and to arrive at a suitable EMI and tenor combination, one can use an online loan against property EMI calculator from a trusted financial institution.
Quick disbursal and balance transfer facility
Typically, some leading financial institutions disburse the loan amount to borrowers within 4 days of approval. It enables them to use the loan value to meet their requirement as soon as possible. Some of the housing finance companies may also extend facilities like loan balance transfer and top-up facilities to the borrowers.
While the former often proves useful to lower the loan against property interest rate, the latter proves potent in providing additional financial assistance to borrowers.
Eligibility criteria for loan against property
Applicants can qualify for a loan against property by meeting these simple eligibility criteria.
- Resident Indians between 23 and 70 years of age.
- A healthy financial standing with a stable source of income.
- A good credit score, preferably over 750 and a clean credit history.
- Property in question must be located in specified areas.
Notably, applicants may need to fulfill additional requirements to be deemed eligible to avail a loan against property. The best way to be sure about it is to get in touch with the lender directly.
Required documents for loan against property
Here is a list of documents needed to apply for a loan against property.
- KYC documents
- Proof of income like salary statement, IT Returns, bank account statement, etc.
- Proof of address and identity.
- Documents of the property to be mortgaged.
- Latest passport-size
Specific financial institutions may require self-employed and salaried applicants to submit additional documents as well. Resultantly, applicants must make sure to find out all the requirements beforehand to avoid confusion.
Applicants can easily avail a loan against property online. All they need to do is –
- Go to the lender’s official website.
- Browse for the ‘Loan against Property’ option.
- Click on ‘Apply now’.
- Enter the required details and submit.
In conclusion, to make the most of a property loan, individuals must check its features along with the loan against property interest rate and find out more about the requirements in detail. Having a fair idea of the eligibility criteria, required documents and application process will prove useful to streamline the process effectively.
Main Factors to Keep in Mind While Taking a Loan Against Property
Though the market for loans against property has slowed down, a significant number of borrowers continue to avail this credit option every year for some of its undisputed benefits. The primary reason can be accredited to its restriction-free end-use and high loan value.
Nevertheless, certain factors need to be considered before applying for this credit to make the most of it. For instance, loan against property interest rate is one of such factors intending borrowers need to become familiar with to manage their credit more smartly.
Things to keep in mind
These pointers below highlight the crucial factors which need to be scrutinized before availing of a loan against property.
Based on applicants’ eligibility, a financial institution sanctions a loan. Also, loan applications can be rejected for not fulfilling eligibility criteria, and its record stays on one’s credit report for a long time. This is why individuals need to check the eligibility criteria set for a loan against the property before applying for it.
Typically, salaried and residing Indians between the age of 33 and 58 years with a stable source of income would be deemed eligible to avail a lap loan.
Usually, borrowers can avail a high loan value through this credit option. Regardless, it must be noted that the sum offered mainly depends on the value of the property that is mortgaged by an applicant and the LTV offered by the lenders. LTV is the percentage of credit a lender is ready to extend against the property’s market value.
Typically, financial institutions provide as much as 60-80% of mortgaged property’s market value as LTV. Other than that, factors like applicants’ repayment capability, debt to income ratio and credit score are taken into consideration to decide a suitable loan value for each applicant.
Since loan against property is a secured credit option, the property loan interest rate is comparatively lower than most credit options. However, factors like tenor, credit history, existing credits and applicants’ income play a vital role in deciding the property loan interest rate.
To further find out how these factors influence the loan against property interest rate, individuals can use an online loan EMI calculator and gain a better idea about it.
Other associated charges
Another factor that tends to influence the overall loan burden is the charges that are associated with the loan option. For instance, processing fee, prepayment charges and related penalties are among the most common charges levied on a loan against property. Understanding the charges on loan against property is crucial as it helps intended borrowers to make a more informed decision in terms of their choice of lender.
Individuals must also take into consideration the swiftness of the disbursal process. For instance, if someone wants to avail of a loan at the earliest to fund their urgent requirement, opting for a lender that disburses the loan value in the shortest time would prove more effective.
Usually, loan against property comes with an extended tenor ranging between 15 and 20 years. Given the fact that the choice of tenor impacts the loan against the property interest rate significantly, individuals must be selecting a convenient tenor for loan repayment. In turn, it comes in handy to effectively repay their existing loan as well.
Contrary to popular belief, loan against property extends tax benefits to borrowers under Section 37(1) and Section 24(b). To elaborate, borrowers can claim tax benefits on the amount of interest paid and charges cleared, including documentation charge and processing under Section 37(1).
On the other hand, if the loan amount is used to purchase another house property, borrowers can claim interest up to Rs.2 lakh under Section 24(b). A borrower can put the funds to such usage to claim these benefits.
Intending property loan borrowers should thus become familiar with factors like loan against property interest rate, eligibility criteria, loan value and tenor and tax benefits, among others. Doing so, they will not only be able to make an informed decision pertaining to the credit but will further be able to manage it smartly.