Loan against property is a type of secured loan wherein you can pledge the property you own and get a loan against it. The value of the loan you get mainly depends on the market value of the property you pledge. Generally, the lenders in India provide loans up to 50% of the property’s value.
One of the significant benefits of applying for a loan against property is that it serves as a multi-purpose credit. You can use the amount for any purpose you want. Generally, unlike home loans, the lenders do not have any restrictions on the end usage of the amount unless you don’t use it for illegal activities like gambling or betting.
You can avail of a LAP for business expansion, buying new equipment for your factory, renovating your home, meeting child’s marriage/education expenses, etc. It is an excellent way to leverage your immovable assets and get funds for emergency needs. While many lenders in India offer LAP, you must be careful and consider the following important factors to get the best offer.
Check the eligibility criteria
Just like any other loan, the lenders approve your application if you meet their eligibility criteria. Hence, it is advisable that you know about the lender-specific requirements before you submit your loan application. This will help you avoid the risk of rejection, and you can get the desired amount without any hassles.
The eligibility requirement for LAP varies across lenders, but most financial institutions have the following requirements –
- You must be an Indian citizen
- Your age at the time of applying for the loan must be 18-65
- You must have a steady source of income either through salary or business
- You can apply for a joint LAP with any of your family member who has a steady income
- You can add a woman family member, be it your spouse or sibling, to get the loan at special interest rate
Compare the interest rate
When you apply for a loan against property, it is pivotal that you compare the interest rate from different lenders to ensure that you get the best offer. The loan against property interest rate has a direct impact on the EMI and affordability. A higher interest on the loan means the EMI would be higher and vice-versa.
Apart from the interest rate it is better to choose a lender that offers the loan with flexible repayment terms. Also, you must compare the other charges levied by the lender such as processing fees, prepayment penalty, etc. Such charges constitute a significant amount and increase the overall loan cost.
Assess the property’s value
This is another critical factor to consider while availing a loan against property. The lenders determine the value of the asset that you want to pledge based on factors like type of property, age and location of property, amenities available, etc.
So, it is better to know the exact value of the property beforehand so that you can be in a better position to negotiate with the lender and get a higher loan amount. Generally, the commercial property located in a popular location tends to fetch higher value and you can be sure to get your loan approved faster against such properties.
Getting a loan against property is easy. Remember the above factors to ensure that you get the best loan offer.