Important Factors to Keep In Mind When Applying for a Loan Against Property

7-step guide to avail of mortgage loan online in India

Getting a loan against property is a sensible way to obtain some quick funds in times of financial need. This type of loan is secured as the borrower pledges their property as collateral. Compared to other forms of credit like personal loans, a loan against property offers lower interest rates. However, before applying for this type of loan, there are several factors that you should keep in mind, to ensure that you obtain the best deal on offer.

Factors that Can Affect Your Loan Against Property

Interest Rate

One of the most important factors to consider when applying for a loan against property is the interest rate. A low interest rate on loan against property can help you reduce your repayment burden. For instance, if you borrow Rs. 10 lakhs for a tenure of 10 years at an interest rate of 10%, your EMI amounts to Rs. 13,235. If you get a loan at an interest rate of 9%, your EMI would come down to Rs. 12,760. This means that you would end up saving Rs. 8,100 over the loan tenure.

Loan Amount

The amount of loan that you can avail of depends on the market value of your property. Generally, banks and other lending institutions offer loans of up to 70-80% of the property value. However, it’s essential to understand that the loan amount you get also depends on your income, credit score and repayment capacity.

Loan Tenure

The loan tenure is the amount of time that you have to pay back your loan. When applying for a loan against property, you should choose a tenure that you find comfortable to repay. While a longer tenure may reduce your EMI, it may also lead to a higher net interest payout. However, if you opt for a shorter tenure, your EMI would be higher.

Processing Fees

It is essential to check for any processing fees when applying for a loan against property. While most banks typically charge a processing fee of 1-3% of the loan amount, it’s important to compare fees across lending institutions to choose the best deal.

Credit Score

Your credit score plays a vital role in determining whether you qualify for a loan against property. A high credit score indicates good creditworthiness and trustworthy repayment capacity. So, if you have good credit, you can expect to secure a better loan deal with lower interest rates and other benefits.

Collateral and Documentation

As mentioned earlier, a loan against property is a type of secured loan that requires a collateral in the form of property. You need to ensure that you provide all the necessary documents to prove ownership and the legality of the property. It’s important to note that the property needs to be free of any encumbrances. Any property that has unpaid loans, taxes or litigation issues may not be accepted as collateral.

Income Proof

It’s essential to show proof of stable income when applying for a loan against property. This is because banks and other lending institutions need to be sure that you have a reliable source of income to repay the loan. You would typically need to provide your salary slips for the past six months, bank statements, tax returns and you’re IT (income tax) returns.

Property Loan EMI Calculator

A property loan EMI calculator can help you calculate the exact EMI you would need to pay each month after taking into account the loan amount, interest rate and tenure.

Using a property loan EMI calculator can help you get a better understanding of the loan amount you can afford and how long it would take you to repay the loan. This would help you make better decisions when selecting the loan amount you need.

Obtaining a loan against your property is like getting a loan by offering your house or land as a backup plan. It’s like pawning your stuff at a pawn shop, but with real estate.

The interest rate is a crucial factor. Let’s say you borrow Rs. 10 lakhs for ten years. At a 10% interest rate, you pay about Rs. 13,235 monthly. If you get a better rate of 9%, your monthly payment drops to Rs. 12,760, saving you Rs. 8,100 over the loan.

The loan amount you can get depends on your property’s value. Normally, banks offer 70-80% of the property’s worth. But it also depends on your income, credit score, and ability to pay.

Final Thoughts

Obtaining a loan against your property is like getting a loan by offering your house or land as a backup plan. It’s like pawning your stuff at a pawn shop, but with real estate.

The loan amount you can get depends on your property’s value. Normally, banks offer 70-80% of the property’s worth. But it also depends on your income, credit score, and ability to pay.