Life is full of uncertain events, which is why you never know when you might need a large sum of money on short notice. Luckily, a loan against property can help you in such situations. So, what is a loan against property?. It is the loan that is obtained from financial institutions by offering your residential or commercial property as collateral. The interest rates on secured loans like these are not as high as unsecured loans, and the money you get can be invested for multiple purposes without losing ownership of the property.
Here are The Steps for Applying for a Loan Against Property
Step 1: If you are planning to apply for a loan, visit the company website and read their terms and conditions carefully.
Step 2: Carefully compare the pros and cons of getting a loan against property from different financial institutions.
The average interest rates for loans against residential or commercial properties range between 8.46% p.a. to 22.04% p.a. You can avail a loan of up to Rs25 Crore depending upon the evaluation of your property. The loan tenure can generally extend up to 20 years and is flexible in nature.
Step 3: Check your eligibility criteria for the same.
As loan against property is a secured loan, the eligibility criteria are quite simple. Generally, any resident of India owning any commercial or residential property can avail this loan. Banks also set a minimum income criterion,which is usually a salary of Rs 25,000 monthly or a turnover of Rs 2.5 lakhs yearly. The age limit varies from 18 years to 70 years. Usually, the individual must be in a secured job for more than 2 years in the same company or in the same line of business.
Step 4: After you find the best deal for your loan against property, you can avail the loan through online application or by approaching the physical branch of a financial institution.
It is always advisable to take loans from a lender with whom you have an existing relationship. This can help you negotiate your EMIs and the approval process will become hassle-free. If you have any prior dealings with a financial institution and have an impressive history of repayment or savings,it can help lower your EMIs.
Step 5: Keep all your necessary documents ready, proofs of identity, income, and the paperwork associated with your property.
When it comes to identity proof,usually Aadhaar Card or Voter Card can suffice. Documents related to address proof like PAN card, Aadhar card, and voter card are required too. Photocopies of the original documents of the property and any related ownership documents need to be submitted. Documents that can serve as your income proof like income tax documents or salary slips are also required.
Step 6: Apply Online or offline
Online submission is a hassle-free process; however, it might fail to answer your instant queries and doubts. For online submission, you need to submit the soft copies of your documents with the requisition. The customer support team will assist you to proceed with it further.
For offline applications, a similar process takes place in person.
Step 7: The financial institution will check if qualify for the loan against property.
When banks offer a loan, they consider it as an investment and scrutinise if the investment is safe and how much risk is associated with the same. In case of loan against property, despite the fact that the loan is mortgaged, they assess if the borrower will be able to actually repay the amount. Hence, they set the eligibility criteria accordingly.
Step 8: Your property will be under scrutiny to calculate the amount of loan you can actually avail.
One of the primary advantages of availing a loan against property is that you can use the money for residential or commercial purposes and the ownership does not change under any condition. However, to ensure that you get the best rates for your property, make sure it is well-maintained as it automatically increases the evaluation amount.
Step 9: Your credit score and credit, property evaluation, and income will decide your monthly EMIs and repayment tenure.
As previously discussed, obtaining a loan from a financial institution with whom you have an existing relationship can decrease your EMI amount. Also, try to maintain a good credit score as it is the most important factor that affects the cost of your EMIs. Your credit history and your repayment history should be impressive as well. Also, ensure that your profit to expenditure ratio is good. This will earn the trust of the lender, as they will know that you can make your EMI payments on time even after meeting all your expenses.
Step 10: After subsequent discussions, the final approved sum of money will be credited to your account.
Discussany fees that might be charged during the disbursal of the loan so that it doesn’t come as a surprise. Also, know if any loan prepayment charges need to be paid, in case you think of paying off the loan before the tenure ends.
All in all, before applying for a loan against property, research well, compare different lenders, assess your repayment ability, and property condition and paperwork. You can also use an online EMI calculator of HeroFinCorp to figure out the amount you can conveniently pay every month.