A loan against property is a viable option for anyone who needs quick funds. Individuals can use this amount to meet personal and medical expenses or fulfil business requirements. However, the type of property against which they are applying for a loan also impacts the loan amount.
For instance, if an individual’s property is located in an area with good communication and many amenities nearby, their chances of getting a lower interest on LAP are higher. Just like a gold loan, personal loan, or loan against securities, loan against property does not have any end-use restriction, except for speculation.
However, borrowers should keep the following factors in mind to repay the credit easily:
Mortgage loan interest rates are a major factor when repaying the borrowed loan against property. If the lender offers you a higher rate of interest, then repaying the amount would be a hefty burden. However, there are certain factors, maintaining which individuals can get an affordable rate of interest. For instance, maintaining a proper CIBIL score determines the financial fitness of the borrower and how responsible they are in repaying the borrowed sum. Similarly, factors like employment status and age majorly influence the interest rate.
While opting for a Loan against property, individuals can choose between a short loan term and a long loan term. Both these terms have their pros and cons. In the case of a short loan term, individuals have to pay high EMI, whereas choosing a longer loan term means spending more on interest and spending more overall. Potential borrowers must have a clear idea about their finances and opt for a repayment tenor that suits them best.
The total amount of loan that individuals seek determines the burden of repayment. In other words, there is a direct relationship between the loan amount and the burden of repayment. However, there are certain factors that determine the amount, such as the market value of a property and the applicant’s financial status. Other factors like the condition of the property mortgaged, good communication, and basic nearby amenities also influence loan against property.
The processing time varies from one financial institution to the other. In general, the processing time required for loan against property is minimal and requires minimal documentation. The loan is taken against an existing property hence documents or paper works already exist, and thus the processing time is a bare minimum for a amount. In addition, borrowers might also enjoy an affordable property loan interest rate, offering error-free and on-time documentation.
Besides this, almost all financial institutions offer pre-approved offers to their existing customers. These offers are available on different products including LAP, and can accelerate the overall loaning process. Potential borrowers’ can check their pre-approved offers by providing details like their names and contact number.
Property loan alone requires a long-time financial commitment as it usually involves substantial loan amounts. The processing fee of LAP generally ranges between one to two percentages. Furthermore, potential borrowers should always compare the processing fee levied by different lenders and choose accordingly, as a small amount of fee difference can majorly impact overall credit cost.
As per RBI guidelines, lenders cannot charge prepayment fees on loan against property under floating interest rates. However, they can charge lap loan interest rates on fixed rates. As the amount is mostly a substantial amount, hence to not get financially drained out, borrowers can opt for LAP at a floating interest rate.
Individuals, who are seeking a loan against property and are worried about repaying the credit, should consider the factors mentioned above minutely. In addition, borrowers should compare offerings across lenders and choose so that they can repay their loan against property in time without getting financially drained out.