Despite the economic
crisis in 2020, there was a substantial amount of growth in the loan market on
the back of reduced interest rates, consumer-focused schemes launched by
financial institutions, etc. According to recent reports, the Indian loan against property market is expected to grow
at a CAGR of more than 14% and reach $857.87 billion by FY26. The key reason
for this particular segment’s growth was instant funding requirements for both
business and personal reasons.
The no end-use
restrictions feature of loan against property enables borrowers to utilise the
funds for anything from meeting cash flow requirements to covering medical
emergencies. However, before getting into the process of availing this loan,
certain aspects should be taken into consideration.
Necessary things to keep in mind before availing LAP
This particular loan
variant involves pledging your immovable asset as collateral and obtaining a
sizeable amount against that. Since you are keeping one of your prized
possessions at risk, it is advisable to be aware of all the relevant aspects
associated with a loan against property. Consider going through the following
factors before getting into the loan application process:
●
Have all the
documents prepared
Even though the loan
disbursal process for LAP is relatively faster than other loan variants, the
rigorous documentation procedure takes quite a long time. Both the loan against
property and home loan eligibility criteria are lenient. However, financial
institutions ask for specific documents like bank account statements, property
documents, etc., before sanctioning the loan. Keep all the necessary documents
handy to acquire quick approval.
●
Interest rates
Due to its secure nature,
the rate of interest is inevitably lower in the case of a loan against
property. However, keeping your credit score high and having a decent repayment
track record automatically helps to negotiate with lenders, lowering such rates
further and making your monthly instalments feasible. It is advisable to keep
your CIBIL score near 750 or above to claim the best interest rates from
lending institutions.
●
Compare
different lenders
Since the obtained amount
is quite high, borrowers should choose the repayment tenor wisely so that
handling the monthly liabilities does not get difficult after a point. It is
advisable to compare different lenders and interest rates before making a
decision.
Choose the loan against
property tenor according to your repayment capacity so that it does not get
difficult to repay such a high loan amount. Usually, a longer tenor helps
individuals to get fast approvals, affordable Loan Against
Property EMI, and less time consumption during the documentation
process.
●
Loan to value
ratio
In the case of
both secured and unsecured loans, factors like interest rates, LTV, EMIs, etc.,
are mostly dependent on lending institutions. Since it involves obtaining a bulk
amount to utilise for different reasons like covering your child’s education,
handling medical expenses, etc., one needs to research well before getting into
this.
Compare private and public
financial institutions to check how much LTV they are offering, factors that
influence their LAP and home loan interest rates, etc., before choosing one.
From analysing your
mortgaged property’s market value to checking the documents, the process often
gets lengthy due to all these. Although the loan disbursal hardly takes a few
days to complete after the evaluation, it is advisable to calculate and keep some
extra days in hand before you need the proceeds.
Apart from these, there
are certain other aspects individuals should keep in mind to manage their
monthly liabilities smoothly. Like home loans, loan against property does not
offer significant tax benefits, which can be a challenging prospect.
Additionally, loan against property processing fees, foreclosure charges, pre-payment charges, etc. generally vary from one financial institution to another. Instead of limiting your research to interest rates, consider acquiring detailed information regarding all these before getting into the application process.
