Your property is a powerful asset that can be leveraged for big-ticket expenses like business expansion, weddings, home renovations, etc. Loan Against Property (LAP) is the right choice if you require additional funds without impacting your savings. Generally, individuals opt for Loan Against Property (LAP) when there is a high financial requirement. But is it the right loan for your needs? In this blog, you will learn what LAP is and what to remember before applying 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
1. 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.
2. 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.
3. 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.
4. 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.
5. 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 Poonawalla Fincorp 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
1. 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.
2. 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.
3. 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.
