Loan Against Property or Mortgage Loan is extremely popular in India as it enables one to meet his/her financial and emergency requirement at the time of financial crunch. Loan against property is a loan which is a secured loan which means when you avail a loan, you need to keep your private property as collateral with the lender. Keep in mind that the property mortgaged can be either residential or commercial. The loan helps one to meet a variety of purposes like to manage a child’s education, finance marriage expenses, giving a boost to your newly started venture or any other personal reasons. In this type of loan, the loan amount is decided based on the market value of your property.
Let’s have a quick look at some useful tips while availing a Loan Against Property
Assess your cash flows and repayment capacity
Do not forget to assess your repayment capacity and evaluate your current financial position before you plan to apply for a LAP or loan against property.
Here, repayment capacity means your ability to repay back the loan before it becomes due. It is always advisable to borrow that much of loan amount which you can easily afford to pay back without taking much stress.
Check your eligibility
Before you apply for a loan against property, you should check whether you meet the eligibility criteria of the lender or not. However, the eligibility criteria may vary from one lender to another. If someone fails to meet the eligibility criteria pre-determined by the lender, this may lead to rejection of your loan application at the initial stage itself. So, to avoid such a situation, the loan applicant might make use of online loan service providers websites which provide loan eligibility calculator tool to calculate your loan eligibility.
Check your credit score and report
Borrowers also require to check their credit score as well as credit report before submitting their loan application to the lender as an error in this will affect your loan approval chances. Lenders also check this in order to assess how disciplined you are while repaying back your loan and how good or bad your previous credit history is. A loan applicant needs to have a CIBIL Score of 650 or above to apply for the loan. If an applicant has a lower score below this then it is more likely to make default in the near future whereas an applicant who has a higher credit score is more creditworthy and is less likely to make any default.
Documents required
In order to avail an instant loan, you need to keep all your documents ready at one place. Key documents required by salaried borrowers includes latest 6 months salary slip, ID and address proofs and latest 6 months bank financial statements whereas the self-employed borrowers have to produce documents like the balance sheet and profit and loss account for two years. In addition to this, you also need some property documents like completion certificate, registration deed, building approval blueprint, occupancy certificate, valuation report from the approved valuer of the financial institution and the latest receipt of the property tax paid.
Know the fees involved
The loan applicant should also be aware of a number of fees involved while availing the loan which includes processing fees, pre-closure charges, sales tax or some another hidden cost. In case of LAP, processing fee ranges between 0.50% to 1% of the loan amount.
