Loan Against Property [LAP] is a product that has become a popular resort in times of financial need. It is offered by most leading financial companies and banks. The type of loan can be availed by providing your property as a collateral. Funds obtained through an LAP can be used for several purposes that includes business expenses, marriages and educational fees to name a few.
If you are looking to secure a loan against property, there are some aspects that you must be clear of. This will ensure that you do not face hassles during the process or disappointment with loan denial. Here are some things that you must be aware of before applying for a loan against property.
Eligibility check by banks – The bank you pick for your property mortgage loan will evaluate and verify your provided information before approval. Several aspects such as your property value, payment track record, credit history and more are closely checked. Depending on the findings, you loan eligibility may increase or reduce. Thus, ensure that you provide all the information to best of your knowledge and have all the required documents well in place.
LTV [Loan to Value] ratio – The LTV ration is decided based on the market value of the property that you provide as collateral. Typically, it may be limited to 40-80% of the market value of the property. Based on the same, you may be granted a loan that ranges anywhere from Rs. 10 lakhs to Rs. 5 Crore.
Flexible tenors – Financial companies offer flexible tenors on mortgage loan against property. Depending on other affecting factors, you can opt for a tenor of 1 to 15 years. A longer tenor makes for a viable option if you have a fixed budget plan while it will also ease your EMI payments.
Default can cause loss of property – You must be aware that not paying your EMIs on time or defaulting in anyway can lead to the risk of losing your property. This is the property that you provide as collateral. For this reason, you should avoid pushing your lending capacity. Over-leveraging yourself brings with it a higher chance of default. It is important to evaluate your budget and stick within your means for the monthly EMIs.
A loan against property is a great way to raise money. However, it is important to note the above factors and make an informed decision keeping in mind your repaying capabilities.