Big-ticket expenditures such as a wedding, children’s higher
education, business expenses, or a home renovation can be hard to
fund. One of the best ways to raise money for such expenses is to
avail of an online Loan Against
Property (LAP).
A Loan Against Property, as the name
suggests, is a loan that is secured by your residential or commercial
property. Since the loan is secured, a Loan Against Property can
provide a large loan amount at a relatively low-interest rate with a
long tenure.
If you’re thinking of availing of a LAP or a
property mortgage
loan, here are some of the factors that you need to consider.
Determine Your Property Value
As mentioned in the introduction, a Loan Against Property can
only be availed by mortgaging your residential or commercial
property with the lender. To understand the amount you will be
eligible to receive while opting
for Loan Against Property, you will need to know the value of
the property that you’re going to mortgage. As a rule of thumb,
lenders are willing to lend up to 80% of the value of the property
to the borrower, with the proportion slightly varying from lender to
lender.
While processing the loan application, the lender will
evaluate to determine the value of your property. This is done by
taking into consideration the age of the property, the location of
the property, the size of the property, the amenities it offers, and
so on. Overall, it is a fair process that takes into consideration
every factor that would affect the market value of the property.
Find out the Eligibility Criteria
Before applying for a LAP, you will need to determine if you’re
eligible for such a loan, otherwise, you may be wasting your time. The
eligibility criteria are usually provided by the lender on their
website. You can also call up the customer care support team of the
lender for assistance in this case.
Here is an indicative list of
the kind of factors that affect eligibility:
- Age – At the time of applying for the loan, the borrower should be a minimum of 25 years of age. Further, they should be a maximum of 65 years of age at the time of loan maturity.
- Income level – If the borrower is a salaried individual, then they need to have a net minimum monthly income of Rs.25,000. If they are self-employed, then their yearly income needs to be at least Rs.3 lakhs. If the borrower is a firm or a company, then it should have an annual turnover of at least Rs.10 lakhs.
- Citizenship – The borrower must be an Indian citizen to borrow from any Indian lender.
- Experience – If the borrower is a salaried individual, then they need to have a work experience of at least one year (and they must have been employed by their current employer for at least two months). If the borrower is self-employed, then they must have been in the same line of work for at least three years.
Check Your Credit Score or CIBIL Score
Your credit score is a score provided by CIBIL which determines
how credit-worthy you are. If you have a high CIBIL score, then that
means that the lender will be more likely to lend you the money. The
CIBIL score is calculated using several factors such as your credit
history, your net worth, and so on.
A good credit score is any
number above 750. In case you have a low CIBIL score, you can
improve it by starting to pay all your credit dues absolutely on time.
Remember that if you pre-pay your credit, then it may adversely affect
your credit score. A low credit score might mean that your loan
application is rejected, or you may have to pay a higher interest
rate.
In case you have a good credit score, then you may be able
to negotiate a lower interest rate from your lender. Further, you may
also revisit the other terms and conditions with the lender.
How Much Do You Need to Borrow?
As mentioned earlier, you can borrow up to 80% of the value of
the property that you mortgage. However, the question remains, how
much do you need to borrow? You should not borrow more money than
you need since that will unnecessarily increase your interest
payments.
Hence, before you make a loan application, you need
to calculate the exact amount that you need. For example, if you’re
borrowing money to pay for a wedding, then you need to calculate the
various expenses involved in the wedding such as the wedding venue,
the catering, the travel expenses, the decorations, the gifts, and
so on. Once you have determined your wedding budget, you will be in
a better position to determine a workable number, which will help
you in availing an online Loan Against Property.
Get The Documents Ready
Since a property mortgage loan is a secured loan, you will need to submit relatively more documents when compared to an unsecured small loan. Here is an indicative list of the kind of documents you should collate for the loan application process:
- Identity Proof – You will need to prove your identity through documents such as Aadhaar Card, PAN card, Voter ID card, and so on.
- Address Proof – You will need to provide proof of address through documents such as electricity bill, passport, and so on.
- Income Proof – You can provide your salary slips or your bank financial statements for income proof. If you’re self-employed, then you may need to provide your income tax returns for the last two years as well as your balance sheet.
- Property Documents – These documents will be required to mortgage your property. You may need to submit the title deed, registration proof, and other related documents.
Wrapping Up
An online Loan Against Property can be a great way for you to finance large expenditures. The secured nature of the loan means that you get better terms and conditions. The loan application for a property mortgage loan is generally hassle-free and you receive the loan amount within a day of the loan being sanctioned.
