Unlocking Home Equity: Applying for a Loan Against Property
Loans against property, also popularly known as property loans or mortgage loans, are loans availed of against a residential or commercial property or a piece of land. Loans against property offer several benefits. These low-interest rate and long-tenor loans come with zero end-use restrictions. Borrowers can use the funds availed of to fulfil both personal and professional obligations. Further, if the borrowing party uses the money to buy another property or invests the money in their business, they can claim tax benefits under Section 24b and Section 37(1) of the Income Tax Act respectively. If you are planning to apply for a loan against property, here are a few things you must keep in mind.
Applying for a Loan Against Property: Keep the Following Things in Mind
1. Loans against property are loans backed by security or collateral. A property you own — residential or commercial property or a piece of land — provides security. However, failing to pay your loan EMIs can lead to your lender seizing your property and selling it for loan recovery. Thus, loan applicants must decide their loan amount cautiously. They must use a loan against property EMI calculator to calculate their EMIs in advance and borrow only if they can afford the loan they want to take. They must also use this calculator for repayment planning and monthly budgeting.
2. Loans against property borrowers must also use the eligibility calculator to calculate the loan amount they are eligible to apply for. This calculator will tell you the maximum loan amount that you can get approved for based on factors, such as age, income, CIBIL score and debt-to-income ratio. If you want to increase your chances of availing of a loan on the loan terms and conditions you desire, you must apply for a loan amount you are eligible for.
3. Maintaining a CIBIL score above 750 will also help you avail of a loan against property on the most desirable loan terms and conditions. Similarly, opting for a low LTV ratio loan will also work in your favour. If you wish to enhance your loan eligibility and chances of loan approval, try and maintain job and income stability.
4. Lastly, in the case of loans against property or mortgage loans, the quality of the collateral matters a lot. Properties with high resale value minimize the risk for lenders and therefore, such properties help borrowers avail of a loan on the most beneficial loan terms and conditions. Properties located centrally and properties located in societies having all modern amenities, such as swimming pools, badminton courts, clubhouse, and gym, have high resale value and therefore, such properties help borrowers fetch a low rate of interest. If you wish to benefit from beneficial loan terms and conditions, try and pledge high-quality collateral.
Loans against property are an excellent financing tool. However, one must keep in mind that these loans involve collateral, and therefore, one must avail of these loans after careful planning and much deliberation. If there is the slightest chance that you may find it difficult to afford a loan at any point in the long journey, it is advised that you think of availing yourself of another financing tool. Loans against property involve an asset and you must never compromise the safety of your assets.
