A loan against property is often the first choice for individuals when faced with a severe financial crisis. Nonetheless, owing to recent delinquencies in this particular credit segment, as reported in the TransUnion CIBIL’s Insights reports, most lending institutions have put fail-safes in place when it comes to loan approval.
Borrowers must know the detailed LAP application process and everything else that goes into its evaluation to successfully avail the loan.
Here is a step-by-step guide to apply for a LAP.
Step 1 – Visit the official website of your chosen lending platform and navigate to the option for the online LAP application form.
Step 2 – Once redirected to the form page, fill in all mandatory fields with name, date of birth, income, property, and contact details.
Step 3 – Click on “Submit”.
Upon receiving the loan request, a representative of your lender will get in touch to complete the documentation and verification process. If you meet all eligibility requirements of the financial institution, your application will be approved. Thereafter, you will get the sanctioned funds transferred to your account.
However, before heading on with the application process, individuals need to keep certain factors in mind.
Factors to consider before applying for a LAP
Following is a list of aspects to look out for when seeking a loan against property.
- Interest rate
LAP interest rates can range anywhere around 7% to 14%, depending on the lending institution. Loan-seekers should always compare the rates enlisted by multiple lenders before choosing the most suitable one. Also, check out other fees and charges associated with the loan before finalising on one.
Using a loan against property interest rate calculator, you will find that a loan of Rs.20 lakh taken at 12% for 10 years entails an EMI of Rs.28,694. Say, another lender is offering the same amount for a similar tenor, but at 9%. Now, your EMI becomes Rs.25,335, saving you approximately Rs.4 lakh on total interest payment.
- Repayment tenor
Like interest rate, the tenor also affects your total repayment liability. Several housing finance companies offer up to 20 years of repayment period for a loan against property. While a longer tenor helps reduce the monthly repayment burden, a shorter tenor reduces the total interest outgo. Borrowers can observe the difference using a loan against property EMI calculator.
- Loan amount
The final amount to be sanctioned is decided upon several factors. A primary one is property value. Lending institutions employ professional appraisers to evaluate properties based on several factors, like age, type (residential/commercial), utilisation, locality, etc. Thereafter, they offer a specific LTV ratio ranging from 50%-90%. The sanctioned amount also depends on the borrower’s repayment capacity.
Some basic loan against property eligibility state that applicants –
- are the owners of the mortgaged property
- have a steady income source like a job or business
- are aged between 25-70 years if self-employed and 28-58 years if salaried
- hold a 750+ CIBIL score
- are Indian residents
Besides meeting the above criteria, make sure to include all your income sources in your application. High income is an indication of greater repayment capacity, which reduces lending risks and thus, improves eligibility.
Here is a list of common loan against property documents required.
- ID and address proof
- All documents related to ownership and other property details
- Financial records like bank statements, ITR copies, and salary slips or audited company balance sheet
Borrowers might wonder why getting a loan against property without income proof seems impossible. Lenders use these financial documents to confirm your current income and liabilities. Accordingly, they will approve a loan amount that does not let the debt-to-income (DTI) ratio overshoot.
Keeping up with the lender’s policies regarding the above factors can help applicants acquire the desired funds. Also, check for any available pre-approved loan offer that several lenders provide against loan against property before applying.
These pre-approved offers, usually provided to existing customers, help to streamline the loan application process. These offers are also available on financial products like home loan, etc. Check your pre-approved offer by providing your name and contact number.
All of these points will only help in facilitating a seamless and speedy loan transfer process.