A loan against property gives you the freedom to use an ample loan amount as per your needs and allows for ease of repayment. To avail of a loan against property in India, you need to pledge a residential or commercial property as collateral and due to this fact, you enjoy better interest rates in comparison to other borrowing options.
Before applying for a loan against property, there are important things you must consider to ensure you are well informed and have a flawless borrowing experience. To do this, ask yourself and any potential lender these 4 crucial questions.
What is your CIBIL score and your repayment ability?
A loan against property is a lot like the other loans when it comes to application protocols. Lenders look into your credit history to gauge your creditworthiness and see if you have been responsible with credit in the past. A credit score of 700 and above is suitable for all kinds of loans, including a loan against property. With this score or higher, you can negotiate for a better interest rate on your loan with ease. So, look into it and work on increasing your score, if needed.
Lenders also look into your income profile to gauge whether or not you will be able to make payments consistently. This is where your debt-to-income ratio comes into play and you must ensure it is below 50% of your income. This shows that you have a sufficient financial buffer to take care of regular and unexpected obligations, and won’t miss your EMIs. If you have a high ratio, you can work towards paying off other existing debts before you apply to enjoy more cost-effective terms.
What is the current value of the collateral?
Lenders decide how much to lend based on the condition of the property you will pledge, its location, and its overall market value. This is part of deciding the loan-to-value ratio and generally, lenders don’t offer a loan over 80% of the collateral’s value. Knowing the exact value before applying, lets you gain an important perspective and helps you negotiate better. If you find that renovating your property can improve its value, you can do so to enjoy a higher sanction.
What are the fees and charges involved?
Apart from the interest rate, lenders charge various fees and charges. Since this has a direct impact on how affordable the loan is for you, ask your lender what they are. Generally, lenders charge you a processing fee, the mortgage origination fee and loan statement charges. In addition to these, inquire about the penal interest rates and the EMI bounce costs. These are charges you should never hope to incur but it is always better to know exactly what you’re getting into.
Do you qualify for the loan?
One of the most important aspects of your application is your lender’s loan against property eligibility criteria. When you meet them, your chances of approval are high. Generally, lenders require you to be over the age of 25 and under 60 to apply. You must also be a salaried individual in a reputed organisation and must own real estate in any of the major cities in India. You also need to be earning a minimum annual income amount set down by the lender according to your city of residence. You also need certain documents to prove your eligibility. So, gather the loan against property documents required beforehand for seamless processing.
Bagging a suitable loan against property is a great way to make the best of your finances. Some lenders even offer additional loan against property features that allow you to leverage and manage your finances better. For example, the Bajaj Finserv Loan Against Property lets you take advantage of the Flexi facility, which allows you to borrow from your sanction multiple times and pay interest only on the amount you actually utilise rather than the entire amount. This feature is great at giving you additional financial freedom to address unexpected costs in times of an emergency or a cash crunch. It also helps you save more.
