A hike in the inflation rate from 3.48% in 2018 to 3.88% in 2019 and a simultaneous fall in GDP to 6.8% in 2019 from 7.5% in 2018. Both the government and common citizens are facing fiscal as well as monetary challenges in such situations.
Thankfully, several financial institutions and NBFCs offer loans against property to help mitigate the financial challenges of such inflation. LAPs are becoming a commonly availed financial product across the nation with individuals not reluctant to use their property value to avail loans and meet their goals.
Before you apply for such loans, make sure you know what is a loan against property. A loan against property is a type of a secured loan that is availed against property mortgaged, such as a house, land, office, etc. In case of a default, the lender can liquidate the property to recover the dues incurred. However, there are specific factors to consider before you take a loan against property, such as:
- Eligibility Criteria-
Some basic criteria that an applicant is required to match to avail a property loan are:
- The age bracket for a salaried employee is between 33 to 58 years, while a self-employed individual should be between the ages of 25 to 70 years.
- You should be a resident of India and should have a regular source of income or be employed under an MNC or a public/private sector.
- You should maintain a CIBIL score of 700 or above.
The documents that are required while you apply for a loan against property are:
- KYC documents- These include your PAN Card, Aadhaar Card, Voter Id, Driving license, etc.
- Bank Statement- Statement of the last 3 months along with salary slip and income tax returns is needed if you are salaried. While for a self-employed individual, bank statement of the previous 6 months will be required.
- Valid address proof along with the copy of the documents of the property to be mortgaged while you take a mortgage loan.
- Tax Benefits-
After you have a clear concept on what is a loan against property, know how you can avail tax benefits on your LAP. As there is no end-usage restriction, the tax benefit will depend on how the funds availed is utilized. If you use the money to invest in your business, then you can claim benefits under Section 37(1) of the Income Tax Act. Whereas, if you use the amount to fund the purchase of a property, then you can claim benefits under Section 24(b) of the Income Tax Act.
- Late-Payment Fees-
The golden rule to get the most out of your loan is never to delay the repayment. Nevertheless, imagining the worst case scenario, there may be times where you might have a financial crisis and be unable to pay your dues on time. Thus, it is essential to inquire what is the loan against property late payment fee structure before you avail this loan.
- Repayment Tenure, Interest Rate and other Applicable Charges-
Know your lender’s repayment tenure range along with the interest rate. For a salaried employee, the repayment tenure ranges from 2 to 20 years while you can select a tenure up to 18 years if you are a self-employed individual. Also, inquire what is a loan against property interest rate along with other applicable charges like prepayment and foreclosure charges.
Thankfully, there are several financial institutions and NBFCs like Bajaj Finserv that provide attractive interest rates on Loan Against Property. Bajaj Finserv also offers other benefits like collateral-free loans, affordable prepayment and foreclosure charges, online account access, faster approval with minimal documentation, etc.
They also provide pre-approved offers which make the application process faster. These offers are available on both secured loans like home loans and unsecured loans like business loans and personal loans. To apply for the loan visit the lender’s official website and select the ‘loan against property apply online option to fill out an application form. After that fill the details such as your name, address, date of birth, income details, contact details, etc and submit the application form.
There are other minimal factors that you should check along with the above-mentioned factors while you avail a loan against property. Make sure you check your property valuation during application and choose the loan amount accordingly. Always remember to analyse your debt-to-income ratio so that you do not default a payment. Also, go for short tenure after considering the EMIs to decrease the total cost of loan.