Keep These Factors In Mind Before Opting For A Loan Against Property
A loan against property is a secured form of borrowing that gets approved against a property pledged as collateral. Since a loan against property is a considerable financial burden carried for an extended tenor, it is essential to consider a few pointers before settling for a loan against property.
6 points to check before applying for a loan against property
The primary factors to keep in mind before opting for a loan against property are –
- Interest rate
Usually, most lenders provide a competitive interest rate as a loan against property is disbursed by keeping a property as collateral. However, this rate depends on multiple factors, including the CIBIL score, property location, and likes. Hence, it is advisable to check all the variables beforehand. Individuals can also use a loan against property interest rate calculator for further assistance.
2. CIBIL score
CIBIL score affects the overall eligibility, interest rate, repayment tenor of a loan against property considerably. It reflects an individual’s creditworthiness, and a CIBIL score above 750 is considered excellent by lenders and offers several perks on loan against property.
3. Repayment tenor and EMI
Most financial institutions generally offer loan against property against a tenor of 20 years. A longer tenor will make the EMIs more affordable, which will ease a borrower’s financial strain. Thus, individuals can take the assistance of a loan against property EMI calculator choosing an instalment amount and repayment tenor.
4. Loan amount
Another important factor to consider here is the loan amount. The quantum of a loan against property depends on the LTV ratio, property value and likes. The loan quantum, however, is capped at 75% of a property’s market value as per RBI’s guidelines.
5. Eligibility and documents
Lenders set their specific guidelines to evaluate a loan application. These property loan eligibility criteria are comparatively less stringent than unsecured loans. Similarly, the documents required for loan against property also vary with lenders. Although the factors mentioned above are variable, here are some standard requirements are –
Loan against property eligibility
- The age should be between 25 to 70 years
- Applicants should have a steady source of income
- The property should reside within the areas specified by a lender
Loan against property documents required
- KYC documents
- Property documents
- Income-related documents
6. Additional charges
Another point to consider here is the foreclosure and prepayment charges associated with a loan against property. Since these charges can increase the total cost of borrowing, it is essential to consider them before applying for this financial product.
Hence, before opting for a loan against a property, it is essential to take note of the pointers mentioned above to make an informed decision.
