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A loan against property is a facility offered by financial institutions that allows you to borrow money against a commercial or residential property. Read on to know more about important things to remember when you avail LAP.
Over the years, loan against property or LAP have gained immense popularity. These secured loans are essentially multi-purpose loans that you can avail from any bank or NBFC (Non-Banking Financial Company) by pledging the property you own. And, depending on the value of the property you pledge, you can get a loan up to a maximum of 50% as loan.
You can pledge both commercial and residential properties and it can be considered as a collateral and supporting documents. While you can easily get LAP, there are a few important things to remember, which are discussed below.
First assess the value of your property
One of the important things to remember while applying for a loan against property is to know the exact value of your property. The value of the asset that you wish to pledge differs based on several factors, including its location, size, amenities available, and age.
So, make sure that you know the total value for the property to ensure that you get the amount you need. If you have a high-value commercial property located in a good locality you can be sure to get your loan approved faster.
Know your eligibility
The eligibility requirements for loan against property varies from lender to lender. However, it is crucial to understand the lender-specific criteria before applying for the loan. This will help you avoid the risk of rejection and help you get the amount you desire. If you meet the requirements of the lender, the application will be approved at a faster pace.
Today, most lenders have a simple eligibility for all. Generally, most lenders have the following requirements:
- You must be a resident Indian.
- You must be aged between 21 to 65 years.
- You must be a salaried employee or a self-employed professional and must have a regular income source.
- You can also apply from a joint by adding an earning member of the family as co-applicant.
- Adding a woman family member as co-applicant can help you get the loan at a better interest rate.
Know about the interest rate
The interest rate of the loan against property plays a critical role in determining the affordability and your ability to repay the amount you borrow. So, before you submit your home loan application form, it is paramount that you compare the interest rate offered by different lenders so that you can choose the right lender with the lowest interest rate.
Apart from interest rate, it is advisable to choose a lender that offers flexible repayment terms and has zero or minimal prepayment charges. Also, you must look for additional charges, as some lenders tend to charge a lower interest rate but charge several other hidden fees, which increases the overall loan charges.
Enquire about other value-added services
Your lender may offer value-added services that can enhance the value of your loan. So, it is advisable to ask the lender about these services and have a better borrowing experience. These services may include aiding with determining the market value of the property, providing customised loan offers, etc.
Final Word
Now that you are aware of the important factors to remember while applying for LAP, do your due diligence and have a happy borrowing experience.