More often than not, a majority of people invest in real estate property for one of three reasons: to make money by selling the asset at a higher price or to park their extra money through the acquisition of the asset or to live in it.
However, there are some of us who are not aware that having the property that we can use as collateral for a loan against property can be of great assistance to us in times of need (LAP). Therefore, we will explain the loan against property to you and share tips to avail of the loan when needed.
What exactly is LAP, and how does it function?
A loan against property, also known as LAP, is a type of multi-purpose secured loan that is offered by the majority of lenders. This type of loan involves mortgaging one’s existing immovable property in order to obtain funds for financial needs such as expanding a business or travelling internationally, as well as for personal requirements such as funding for education expenses, medical costs, or wedding costs. Residential property, as well as property utilised for business purposes, can be used as collateral for a loan.
LAPs are recorded against the property that the borrower has pledged as collateral for the loan. In most cases, the LAP can be utilised to generate funds through the utilisation of either personally occupied or rented out real estate. Also, there is Loan Against Property EMI Calculator tool to help you get a fair idea about your EMI amount.
Before you apply for a loan against property, here are some financial considerations to keep in mind:
Evaluate the flow of your cash and your ability to make payments
Before you apply for LAP, you should make sure that you have determined your ability to make repayments and evaluate your current financial situation by analysing your cash inflows and cash outflows. Your ability to repay the loan is referred to as your repayment capacity, and it takes into account both your present amount of income and your EMI to income ratio. If your EMI to income ratio is greater than 50 percent, potential lenders might think twice about extending credit to you, or they might charge you a higher interest rate than they would others. Because of this, you should only take out a loan that you will be able to easily repay, taking into account both your current financial situation and any prospective changes that may occur in the not too distant future.
Once you are clear about all this and the expected amount you need, check Loan Against Property EMI Calculator to evaluate your expected EMI amount as per different tenures and interest rates.
Check if you meet the eligibility parameters.
Your loan application will only be accepted by the lender if you meet all of their eligibility requirements, such as having a certain minimum age and income, having a certain employer profile, living in a certain area, etc. Make sure that you check your eligibility with a number of the lenders that you have chosen, as each lender has its own unique set of requirements for applicants to meet in order to qualify for loans. If you are unable to meet these requirements, your application for a loan may be rejected outright within the very first step of the process.
If you think you can meet this criterion, then go ahead to use the online Loan Against Property EMI Calculator to know the approximate EMI you would need to pay as per chosen tenure, amount, rate etc.
Also Read : Home Loan Interest Rates All Banks 2022
Make sure you get your LAP from a suitable lender.
In the case of a loan secured against property, the processing of the loan includes, in addition to the documentation and other required formalities, an additional phase in which the lender evaluates the property that is going to be mortgaged. Because of this, it is even more vital to select the appropriate lender according to your qualifications and the needs you have. Borrowers can use online financial markets to compare several lenders and select the one that best meets their needs by making their choice. In light of the fact that LAPs are typically obtained for longer periods of time—up to 15 years—variables like interest rates, processing fees, LTV ratio provided by the lender, and service terms, amongst others, ought to constitute a major foundation upon which to compare various lenders.
Examine both your credit report and your credit score
Just like you check the Loan Against Property EMI Calculator before applying so that you know fairly how you stand in terms of EMI repaying capacity, you also need to check your credit profile.
Borrowers need to examine their credit score as well as their credit report before submitting their loan applications. Errors in either of these documents can be extremely detrimental to a borrower’s chances of having their loan application approved. The evaluation of your LAP application includes a review of your credit history by means of a review of both your credit report and your credit score. A lower credit score portrays you as a less creditworthy borrower who is more likely to default on loans in the future. This can result in the rejection of your loan application or the approval of your loan application combined with a higher interest rate.
In addition, you should routinely check your credit report to ensure that no error or fraudulent activity has been overlooked. This could cause your credit score to suffer, which could lead to the denial of a loan application.
Don’t be careless with documentation.
The documentation for LAP may include audit reports, income tax returns (ITR) for the most recent two to three years, documents proving identity, financial accounts, payslip, bank statements and so on. In addition, in order to evaluate the legitimacy of the property and its ownership, the borrower is needed to hand over all of the relevant legal documents about the property in question when applying for a LAP.
But make sure to always check Loan Against Property EMI Calculator before submitting the LAP application, even if documentation seems ready. It’s important to know the expected EMI amount from the calculator to ensure you are financially ready to pay it, or else your application can get rejected.