Posted On: 17-March-2022
A loan against property is the most secured type of loan one can avail. In this type of loan you pledge a property or your own valuable asset in return for a higher loan amount. The property or asset that you pledge in return is usually known as collateral. The demand for loan on private property has gained popularity in India and is expected to increase by 22% in the next one year. Taking a secured loan like mortgage loans have its own great advantages. It may seem like a better alternative to an unsecured loan. But never think that your asset is enough to get your loan amount sanctioned. That's not the case. Your credit history together with your income and CIBIL score plays a major role in determining your loan eligibility. Read the few factors below if you want to pass through this hectic loan approval process in the smoothest possible ways.
1.The loan amount you can get
You first need to know what are the kinds of loan that fall under loan against property. You can avail for this loan by pledging your land. It usually is a type of property loan. The other types of loan that fall under this are home mortgage loan, land mortgage loan, loan against plot and mortgage loan against agricultural land. When you apply for loan against property the loan agency would offer you a percentage of the market value of the property you pledge as a loan.
2.The interest rate
Interest rates in this scenario shouldn't logically be much because you're already borrowing the loan against security. But this interest rate or charge can vary from one loan agency to the other. Each lender charges differently. But you do have the choice to choose between a fixed and a floating interest rate.
Because these loans are backed by a security, loan against property usually offers its clients long tenure which can extend upto 20 years. The more you increase your repayment tenure the lesser is the amount of EMI that you pay every month. But the disadvantage of long tenure is that you pay more interest rates in the long run. As shorter you keep your loan tenure is the better.
Your CIBIL score is the reflection of your credit worthiness. The better your CIBIL score the greater is your chance at getting your loan application approved. Any lender belonging to any loan agency will go through your credit history and check your credit score in order to offer you a loan against property documents. Thus, it's important that you prove your financial worth by showing a good income and apply for a loan only when you have a credit score of 750 and more. Facing rejection on your loan application due to low credit score will bring down your score even further.
The lender will evaluate your repaying capacity with the help of your income statements, repayment history, ongoing loans etc. To sum up, a loan against property offers greater flexibility, lower interest rates, higher loan amount, and a longer repayment tenure and feasibility of end use. While the long-term advantages of this type of loan make it a much better option than personal loans, it is important to remember that if the borrower defaults on repayments, his or her rights over the property are transferred to the lender.
A loan against property is a boon for both business owners and salaried employees. Self-employed who are seeking funds for expansion of their business can make use of this facility. Salaried professionals facing a sudden medical crisis that may require long-term treatment, including expensive surgery, or sending children to a foreign university for higher studies can avail the facility for raising funds. A LAP not only leaves one’s savings intact, but it also comes at low-cost EMIs with repayment tenures of as long as 15 to 20 years. The low-interest rates on such loans dilute the repayment burden.