Factors to consider while taking a loan against property
The current economic scenario has created a financial crunch among Indians. Sustaining the daily expenses while meeting emergency fund requirements is becoming all the more challenging. As a solution, many individuals look for a high-value alternative like a loan against property.
Potential borrowers planning to secure the said credit need to have a clear idea about the related factors or variables. For instance, understanding what is a loan against property will assist them in making an informed decision and organized spending.
According to a report, the Indian loan against property market is predicted to grow over 14% CAGR by FY2026. This data indicates an apparent demand among borrowers for this secured credit form.
This fact can be attributed to its affordability in terms of loan against property interest rate and provides easy accessibility. Applicants need to fulfil basic eligibility and documentation to avail funds for big-ticket expenses. Moreover, a flexi loan facility makes it ideal for individuals facing difficulties paying medical bills, wedding expenses, travel costs, etc.
Key factors to note before applying for a loan against property
Individuals must consider the following factors to improve their chances of LAP loan approval and maximise their benefits.
Before initiating a property loan application, individuals should evaluate their credit reports. This indicates their eligibility and borrowing responsibility. Technically, the CIBIL score plays a vital role in finding a reliable lender levying affordable interest rates. Individuals with a 750+ credit score and credible repayment history are obligated to receive better loan terms. Besides, they can negotiate to reduce their repayment structure smartly.
Since a lender puts considerable weight on an applicant’s credit score, maintaining a good CIBIL score is always beneficial. Therefore, individuals should determine how credit score affects loan against property eligibility and implement ways to improve it, if required.
- Repayment tenor
A loan against property obligates a borrower into a repayment structure. This factor is based on the tenor selection. LAP applicants should choose this period based on their financial capability. This would streamline their timely payments on a large-value credit. Typically, choosing a longer tenor brings down the EMIs, simultaneously increasing the interest outgo. Comparatively, a short tenor would reduce the overall interest but increase the EMI burden.
Thus, prospective borrowers need to determine a tenor that doesn’t burden their disposable income. A compatible tenor would aid in making lucrative savings on the loan variant.
- Tax benefits
Finding ways to save more on a credit form is always beneficial. However, simply gaining information on what is LAP wouldn’t initiate such goals. Commonly, applicants focus on lending institutions that propose affordable services and terms.
An individual need to know how can you avail tax benefits on your LAP to leverage the scale of savings for future endeavours. They can get tax benefits on the interest paid under Section 37 (1) of the Income Tax Act. Moreover, individuals can gain maximum benefit upto Rs.2 lakh under Section 24. However, the benefit is available on the interest paid on LAP used to purchase a house.
- Lending institution
Finding the right lender is again a vital factor for a loan against property applicants. Naturally, the competitive market is full of options. Therefore, individuals need to follow a structured comparison to determine a genuine financial institution that extends a lucrative loan quantum.
Furthermore, such HFCs also provide pre-approved offers that make loan applications easier and hassle-free. These offers are available on financial products like a loan against property, home loan, etc. You can check your pre-approved offer by providing details like your name and phone number.
- Additional charges
Apart from checking the loan against property interest rate, potential borrowers must determine the additional charges levied by lenders. Therefore, maintaining transparency in this factor will help make an informed decision. The additional charges usually include processing fees, foreclosure charges, prepayment fees, etc. Individuals can place a query with a lender and review their charges before initiating an application.
These are some of the essential factors that potential borrowers must evaluate for well-informed borrowing. In this regard, one must also keep a tab on updated eligibility parameters and documentation to streamline the application process.