The property loan portfolio recorded a noticeable 17% growth in FY 2018. Loan against personal assets like residential and commercial properties acquired a significant 56% and 37% share, indicating the popularity of such credits.
With the ease of availability and high value, secured loans like loan against properties have become convenient means to raise external finance. These credits come with zero-end usage restrictions, allowing a borrower to utilise the funds for big-ticket expenses like child’s education, business expansion, meeting unforeseen medical emergencies and many more.
Also, lenders often offer high loan to value ratio (LTV) of up to 75%, disbursing a considerable sum against a mortgaged property. A residential or commercial property with high market value can thus fetch you a loan against property of up to Rs. 3.5 Crore.
However, a borrower has to keep in mind several important aspects while opting for a loan against property. It will ensure higher chances of approval and allow them to reap the maximum benefit from a particular credit scheme. Let’s take a look at the guidelines and factors you should consider while opting for a credit.
Things to consider before availing a secured credit:
- The value of property to be mortgaged
The value of the mortgaged asset is of significant importance when seeking to avail loan against property. Multiple factors play in determining a property’s value, such as –
- The locality it is situated in.
- Age of the property.
- Property’s size.
- Amenities available.
Knowing the value of your property is important as it gives you an idea of the loan amount you will be eligible to avail as per your lender’s policies. It also helps in deciding which property to mortgage in case you have multiple assets. Generally, a high-value property situated in a well-connected location with the necessary amenities fetches maximum property loan value.
- Interest rate comparison from various lenders
You must also compare the interest rates offered by various lenders to find the most affordable offer. Remember to consider the loan tenor as well to check affordability as loans with low-interest rates may result in higher EMIs if the tenor is not long enough.
Use an online EMI calculator to compare instalment amounts resulting from varied interest rates and determine the ideal tenor of your loan on property accordingly. You can decide on the lender whose interest rates and tenor help arrive at a suitable EMI amount for easy loan repayment.
For example, lenders like Bajaj Finserv bring these loans at competitive interest rates along with a tenor of up to 20 years for affordable repayment.
They also bring pre-approved offers which make financing quick and hassle-free. These offers are available on home loans, business loans and personal loans, along with several other financial products. All you need to do is provide a few essential details like your name and contact number to check your pre-approved offer.
- An estimation of the amount required
An estimation of the total expense will help you decide the right loan amount. To arrive at this amount, make a list of expenses you seek to meet with the property loan.
For instance, if you require the amount for expansion of office, list down the costs to be incurred for this expansion like the price of office space to be purchased, expenses required to set up its interior, purchase the necessary equipment or software, etc. Add up these financial requirements to arrive at a suitable loan amount to be availed.
- Eligibility criteria required
Eligibility criteria for property loan vary from one lender to another. You must, therefore, know the necessary eligibility requirements before applying. Meeting all the eligibilities improves your chances of loan approval. It also fast tracks application processing for fast approval.
The general eligibility you need to meet for this mortgage loan include the following.
- A predetermined age bracket.
- Employment status of the applicant.
- Indian citizenship with residential status.
You will also be required to submit the supporting documents along with your KYC details to avail the loan.
Other features and benefits offered by the lender
You must also check other features and benefits offered by the lender before applying. Features like hassle-free disbursal ensure you receive the loan amount at the earliest to meet emergency funding needs. Some lenders also offer a property loan balance transfer facility that allows you to repay the mortgage loan at lower interest rates, thus increasing affordability.
Once you have considered all these factors, you can fill up the application form to apply for a suitable loan amount and expect fast approval. Keep the documents needed to apply for the loan handy to ensure timely submission during the application process.