Finance

What Should You Consider When You Take A Loan Against Property?

Loan Against Property (LAP) is one of the most secure forms of loans and can provide substantial funds when in need of it. It is easy to process, provides a flexible tenor, and comes with easy pre-payment options. 

Most Important Things to Watch Out For Before Taking an Loan Against Property: –

 

  1. Mispresenting the property value in your application- 

The lender would get the property evaluated in any case, and that would depend on the actual market rate then. Hence, it is pointless to overrate your property value in your application form.

  1. Going with a lender without comparing interest rates- 

The interest rates on loans against property may vary from lender to lender. Hence it is advisable to compare rates from several lenders as this would highly affect your EMI amount and the repayment duration. Pick and choose the one that offers the lowest interest rates, lucrative and flexible repayment terms, and doesn’t charge you secure fees or statement charges on the loan amount. 

  1. All-purpose loans-

A loan against property may be used for multiple uses like purchase of machinery, financing higher education for your children, closure of current higher-interest debts, purchase of a new property, etc. Hence, make your choices smartly according to your requirement and then apply for a loan against property

  1. Choosing a higher tenure when you can repay sooner-

Always remember, the longer the repayment period of your loan, the higher would be the interest amount that you end up paying. Hence, evaluate your financial position and choose a tenor that suits you the best. Do not opt for a longer tenure because you are being offered one. 

Who Can Apply for a Loan Against Property:

Lenders have varying LAP eligibility criteria. Hence, it is important to check the requirements beforehand. These can be taken by both salaried and self-employed individuals. However, for the former, the age bracket is 21-68 years while for the latter it is 28 to 70 years. 

Both should have a regular source of income and should hold a good credit score. A credit score plays a very important role in approval, so maintain a good credit score.

The documents required for salaried individuals are:

  • Bank account statement for the last 3 months
  • Salary slips
  • Identity proof
  • Address proof
  • Property documents
  • PAN card
  • ITR filed

For self-employed people, the documents required are:

  • PAN card
  • Address proof
  • Bank statement for the last 6 months
  • Identity proof
  • Business documents
  • Income documents and financial statements.
  • Property documents

Before applying for a loan against a property check the lender’s terms and conditions carefully and keep your documents ready.

All the above points should be checked thoroughly before you apply for a loan against a property. 

Final Take

Considering all the above points carefully, it needs to be kept in mind that a loan against property would mean locking in your property with the lender for the entire tenure until the last EMI, along with the interest amount being fully cleared. Hence, it is advisable not to take LAP for long terms. 

Must Read:

What are Some Successful Tips and Guidance for Taking SME Loans in India?

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