A Loan Against Property is a smart choice if you need financial assistance for personal or business purposes. This secured loan allows you to pledge your property as collateral in exchange for a loan. The loan amount is typically a percentage of your properties’ market value whether it is residential, commercial or industrial. For instance, imagine having a house worth ₹50 Lakh, and you need funds for your business expansion, so you approach a financial institution for a loan against your residential property. The lender will access your property’s value and agree to lend you 60% of your property’s current market value, which is ₹30 Lakh. You can now use this fund for your business expansion while ensuring timely repayment.
However, before you dive into the application process, read more about the several factors that you must look out for before applying for a Loan Against Property.
Factors to Consider Before Applying for a Loan Against Property
Here are the 8 factors to consider before applying for a Loan Against Property:
1. Property Valuation
The property mortgage loan is offered against collateral, which means you must pledge our property as security. Whether it is residential, commercial or industrial, you can avail of a loan for any of these properties. The lender will apprise your property based on the current market value. This is known as LTV or loan-to-value ratio, which may differ from lender to lender. You can get up to 100% of your property’s value with Poonawalla Fincorp.
Also Read - How to Secure a Loan Against Property?
2. Interest Rates
The property mortgage loan typically offers an attractive interest rate, but it can vary from lender to lender. Even a small difference in rate can make a big difference in loan repayment. So, check the loan interest rate carefully, before you apply for a loan. Additionally, understand whether the interest rate is fixed or floating. Fixed rates remain constant throughout the loan tenure, while floating rates can change based on market conditions.
3. Loan Tenure
The loan tenure can greatly impact on your Equated Monthly Installments (EMIs). Longer tenures result in lower EMIs but increase the total interest paid over the loan period. Conversely, shorter tenures lead to higher EMIs but lower total interest. Choose a tenure that balances affordable EMIs with overall interest costs. Also, check if the lender allows prepayment or foreclosure of the loan without hefty penalties. This can help you save on interest if you decide to repay the loan early.
4. Loan Amount
The loan amount offered by the lender is based on multiple factors, which include your creditworthiness, the property’s market value, age, condition and the lender’s internal policies. Based on which the lender will offer you the loan amount. Your income stability and repayment capacity also play a significant role in determining the loan amount. Lenders may require proof of consistent income to ensure you can manage the EMIs.
5. Repayment Flexibility
The property mortgage loan typically comes with 12 to 15 years of repayment tenure, and you can tailor it based on your will and repayment capacity. Some lenders offer flexible EMI options which can be beneficial if you expect your income to change over time.
6. Processing Fee and Other Charges
While applying for a property mortgage loan, check the loan processing fees and the other charges associated with the loan amount. It is essential that you check the fees and charges linked to the amount carefully to avoid any confusion later. Be aware of any hidden charges such as legal fees, valuation charges, or administrative fees that might be added to the loan. Lenders, like Poonawalla Fincorp, ensure transparency by offering zero hidden charges, which can help you avoid unexpected costs.
7. Eligibility Criteria
The lender offers you a mortgage loan against your property based on several factors. These factors may include your credit score check, physical, technical and legal assignments to determine your loan eligibility. Let’s look at the main aspects of availing of a Loan Against Property:
A. General Eligibility Criteria
- CIBIL Score: The lender will conduct a CIBIL check to know your repayment capability. A higher credit score, i.e. 750 and or above, can increase your chances of getting a loan at an attractive interest rate and favorable terms.
- Minimum Income: The financial institution processes your loan application only if you meet their minimum income criteria. However, the income requirement may differ from lender to lender.
- Profile Occupation: Securing a Loan Against Property has no restrictions. Whether you are a salaried individual, self-employed, or a firm/business owner, you can apply for a loan against your property.
- Work Experience: The lender often accepts your loan application if you fulfil their minimum work experience criteria.
- Business Vintage: One of the factors that lenders evaluate while deciding your loan interest rate is your business vintage. Most lenders check how many years you have been operating your business and how healthy your business is.
- Citizenship: Most lenders offer mortgage loan to Indian citizens.
B. Property Eligibility Conditions
- Property Type: To secure a loan against your property, you may pledge your residential, commercial or industrial property as collateral.
- Ownership Type: You can pledge any property you own as security for a mortgage loan. In case the property has more than one owner, then the co-owners will be the co-applicant on your loan application.
- Property’s Age and Condition: Your property must meet the lender’s eligibility criteria for pledging it as collateral.
- Legal Dispute: The property offered by you as security must not have any legal disputes against it.
8. Documents Required
While applying for a loan against your property, you must submit a few documents which are required by the lender. This list of documents may differ from lender to lender. However, here are a few common documents that your lender will ask you to submit while processing your loan application:
A. Personal Documents
- Identity Proof (any one): Aadhaar card, PAN card, Driving license, etc.
- Address Proof (any one): Rental agreement, Passport, Utility bills, etc.
- Income Proof: The income proof document which is required to process your loan application depends on occupation profile:
- For Salaried Employees: Salary slips, and bank statements past 2-3 months.
- For Self-employed Individual and Business Owners: Balance sheet, Profit and Loss statement, and income tax returns.
B. Property Documents
Here are the documents that you must submit while applying for a loan:
- Sales deed or agreement
- Copy of tax registration
- Tax receipts
- Electricity bills, gas bills, etc.
Now that your documents are ready, here’s a guide to applying for a Loan Against Property.
Also Read - Tax Benefit on Loan Against Property
Steps to Apply for a Loan Against Property
Step 1: Start researching for the financial institutions that offer Loan Against Property.
Step 2: Check their eligibility criteria.
Step 3: Gather the required documentation, such as ID proof, address proof, bank statements and property documents, etc.
Step 4: Go to the application page of the lender and fill out the application form with the necessary information.
Step 5: Submit the application form by uploading all the documents.
Step 6: Wait for the verification. Once all the documents have been verified the lender will send you the confirmation.
Step 7: Review and loan offer and confirm the details.
To Conclude
Getting a loan against your residential, commercial or industrial property can help you cover all your emergency financial needs. But you must look out for the factors such as property valuation, interest rate, loan amount and the other factors mentioned above before applying for a Loan Against Property. Searching for a trustworthy lender for your loan is essential. This is where Poonawalla Fincorp comes in. With our quick processing with minimal paperwork requirements, flexible repayment terms and high loan amounts you can avail yourself of a loan in no time. So, what are you waiting for? Apply now!
Also Read: How to Use a Loan Against Property EMI Calculator?
Frequently Asked Questions
1. How can I calculate the EMIs against my loan amount with Poonawalla Fincorp?
Calculating your loan amount is simple and requires only a few steps. Follow these steps to calculate your loan EMI amount hassle-free:
Step 1: Visit the webpage
Step 2: Enter the loan amount, tenure and the interest rate offered to you.
Step 3: Click on the ‘Calculate’ button.
Check the auto-generated results under ‘EMI Amount’ to know your monthly EMIs.
2. Can I calculate my LTV ratio?
Yes, you can calculate your Loan to Value Ratio (LTV) with the help of the following steps:
Step 1: Click on the ‘LTV Calculator’ on Poonawalla Fincorp’s official website.
Step 2: Select your type of property.
Step 3: Enter the estimated value of your property. You must enter the estimated or appraised value of the property you plan to put as collateral.
Step 4: Check your eligible loan amount.
3. What are the types of properties one can keep as security with Poonawalla Fincorp?
Poonawalla Fincorp allows you to keep your residential, commercial, and industrial properties as collateral.