Among the various kinds of loans, you can avail from banks and financial institutions; a loan against residential or commercial property is a popular option. The loan availed by mortgaging property can be used for various purposes. Whether it is to expand business operations or to attend to an unexpected financial emergency, LAP makes it possible to get access to funds. The popularity of LAP can be gauged from the fact that it was estimated to be worth Rs 5 trillion by 2019.
What is Loan against Property?
Also known as Mortgage loan, loan against property is categorized as a secured loan that is provided with a legally owned property as a guarantee. It is different from housing loans where you take a loan to purchase a new/ old property. The interest rates are lower than a personal loan and make it a viable option.
Factors to Consider When Choosing LAP
Loan to Value Ratio
LTV ratio will tell you how much loan you can get for mortgaging the property. It is always better to compare the ratio offered by various financial institutions before finalizing on one. Private financial institutions tend to provide a higher value compared to public ones. The value will further decrease if the property attached is commercial.
EMI and Tenure
While the exact loan against property interest rate depends on individual banks, it usually ranges from 9% to 15% per annum. The interest rate will depend on the tenure of the loan and the LTV ratio. The tenure of LAP is between 7 to 15 years.
Evaluate the Property
As long as you are the legal owner of the property, you can avail of a loan against it. A residential or a commercial building or land can be used as a guarantee. more than one person owns the property, all owners should apply for the loan together.
The eligibility criteria for loan against property are broadly similar across different financial institutions. Some important parameters are:
Being a salaried employee or self-employed professional
Within a certain age group. For example, a salaried borrower would need to be less than 60 and a self-employed would need to be less than 65.
Is this the right time to avail Loan Against Property??
There are various credible financial institutions offering loans against the property at competitive interest rates. The process of availing the loan is also quite simple. Therefore, it is a great time to avail loan against property.
However, the prospective borrower must also have a foolproof plan of repaying the loan through EMIs. It is recommended that the borrower plans this out before applying for a loan. It is also imperative to take loved ones into confidence before mortgaging one’s property.
It is easy to know the loan against property interest rate even before applying for the loan. You need to visit the website of the financial institution you’re considering and use the online LAP EMI calculator.