Things to follow while taking a loan against property
A loan against property is a big-ticket financing source that backs up substantial spending. These expenses can include medical emergencies, weddings, and education. The flexibility of spending and the affordable loan against property interest rate makes it a viable option during a financial crunch.
According to a report, the Indian loan against property market is predicted to register a 14% CAGR by the financial year 2026. This prediction is based on the rising demand for secured credit among borrowers to sustain the current economic scenario.
Again, the RBI’s stance to keep the repo rate at 4% has made this high-quantum loan a preferable choice among borrowers. However, availing a loan for the features won’t suffice the objective. Individuals need to keep certain factors like loan against property eligibility in check to streamline the borrowing.
Factors to check before making a loan against property application
Availing a loan against property is a long-term commitment. In addition, borrowing obligates an individual to a repayment structure. Hence, it is vital to have in-depth knowledge of the variables linked with it. This would eliminate any risk of loan cancellation or default in the future.
Some of the factors that every loan against property applicants must know are discussed below.
Know the eligibility criteria
The property loan eligibility parameters can vary across lenders. Hence, it is imperative to check the criteria laid down by a financial institution before applying. Lenders usually lay these parameters to assess an applicant’s repayment capability. Typically, they check credit history, income profile, and age. Failing to fulfil specified parameters may lead to loan application cancellation.
Alongside, borrowers also need to submit documents for loan application and processing. These include –
- KYC papers
- Employment proof
- Salary slips
- Savings account statements of three months
- Documents related to the mortgaged property
In this regard, individuals should know that lenders may ask for additional documents pertaining to their policy. Therefore, keeping these papers handy would make a loan application swift and hassle-free.
Check the property value
The property value is a crucial factor that applicants must check before making an application. In addition, lenders check the property location, type, age, etc., before deciding the loan eligibility. This factor also influences the loan against property interest rate. Typically, a property located in a prime location and surrounded by necessary amenities carry a high value. Naturally, borrowers would be obliged to offer better terms, including the interest rate.
Hence, individuals can evaluate the value of their property beforehand and confidently approach a lender. This would help in maintaining transparency in the entire process.
Always compare lenders
To make borrowing successful, individuals should follow a systematic comparison. The competitive lending market is filled with options where finding a reliable lender is always challenging. Potential borrowers can check third-party sites for reviews or ask existing borrowers before deciding on a lending institution.
To simplify the comparison, they can also use the loan against property interest rate calculators and compare the repayment obligations. This would further help them in finding the best terms and customised service.
Many HFCs also provide pre-approved offers, which render the application process quick and easy. Such offers are available on numerous financial products like a home loan, loan against property, etc. Check your pre-approved offer by sharing details of your name and phone number.
Determine the exact fund requirement
A loan against property is preferred by borrowers due to its substantial credit offering. However, this should not be the sole reason to borrow. Obtaining a high-value loan without the necessary repayment backup or requirement can be a cause of default and repayment issues. To avoid such problems, it is imperative to evaluate the exact fund requirement and make an application accordingly.
Deciding the right tenor is helpful in making healthy savings. This factor essentially impacts the repayment structure of a loan. For instance, choosing a short tenor will lead to high EMIs, but the overall interest outgo will reduce. Conversely, a long tenor will increase the interest outgo but reduce the EMIs. Hence, loan against property applicants should determine the ideal tenor before initiating an application.
Keeping these factors in check would ensure a pleasant borrowing experience and help individuals make the most of their property’s equity. Moreover, they can secure an affordable loan against property interest rates, facilitating ways for them to make better savings for future endeavours.
Also read: 7 Profitable Ways Landlords Can Benefit From Real Estate Software