As per the report published by Research and Markets, loan against property in India is anticipated to grow at a CAGR of more than 14% by the end of 2026. The increase in popularity of this financial product is primarily due to it salient features like affordable interest rate, no end-use restrictions, and flexibility in repayment.
Therefore, before applying for this financial product, one should learn more about it in detail and then make a decision.
What is a loan against property?
As its name suggests, this is a credit medium available by mortgaging a property, be it residential or commercial. Being a secured loan type, it offers advantages like a longer repayment tenor, affordable interest rates, and a substantial loan quantum to meet any requirements that one has.
Nonetheless, before applying for a property loan, one must know the following aspects associated with the loan that one should be mindful of.
Things to know about loan against property in India
- Property evaluation
A loan against property in India can be availed against self-occupied, commercial, and industrial properties. Moreover, if a property has multiple owners, no one should have any objections regarding this. Usually, financial lenders evaluate a property’s market value and sanction up to 75-80% of the total value as credit.
However, before sanctioning the final amount, financiers consider a property’s age and overall condition. To ensure a hassle-free loan approval, it is wise to ensure the property is free from any legal issues and in good condition.
- Loan to value (LTV) ratio
To secure best repayment terms and loan against property interest rate, it is essential to compare different financial institutions and check the loan to value ratio extended by them. There is a prominent difference in the percentage of LTV, and this variation depends on how financial institutions estimate or their set rules, thereby restricting the offered LTV.
Furthermore, borrowers must note that if they pledge a commercial property as collateral, the offered LTV is usually less.
- Eligibility criteria of LAP
Though eligibility parameters differ from one financial institution to another for a loan against property in India, some basic factors are considered by financial institutions, such as a borrower’s age, monthly income, repayment capacity, etc.
Besides these, the employment status of an applicant also plays a significant role in determining the final status of a loan application.
Therefore, it is crucial to understand and fulfil the eligibility parameters of respective lenders to avail a preferred amount. Fulfilling the eligibility criteria will ensure a seamless approval.
- Documentation
Another vital point to remember about applying for a LAP is to meet its documentation requirements. Any discrepancy here can lead to a loan rejection. Following is a list of papers that one needs to submit as a part of this process –
- KYC documents
- Employment proof, income proof (salaried)
- Business ownership documents, registration certificate, financial documents such as balance sheet, profit and loss statement, etc. (self-employed)
- Mortgaged property documents
In this regard, one must ensure that all the papers are updated and in order to avoid any delays during the loan application.
- Pre-approved offers
Another vital point to keep in mind here is the availability of pre-approved offers. Leading HFCs extend this facility to its customers that streamline the loan application process and save time. These offers are applicable on financial products like loan against property, home loans, and many others. Individuals can enter their personal contact information to learn more about it.
Further, the interest rates of loan against property vary from one lender to another. Therefore, to secure an affordable rate on LAPs, individuals can meet the required eligibility parameters, maintain a decent credit score, and produce necessary documents.
Alternatively, to ease the repayment procedure, one can use loan against property EMI calculator to determine the exact EMI beforehand and plan their finances accordingly.
Hence, to conclude, a loan against property in India is one of the effective borrowing options to avail funds without any restrictions over its usage. However, one must remember that if they are unable to pay off the loan on time, lenders will have the authority to seize the mortgaged property and auction it to recover the remaining amount.
