A loan against property often acts as a preferred alternative to unsecured loans, considering the lower interest rates and other borrower-friendly features. This loan amount can then be utilised for several reasons, including starting a business, paying for higher studies, or debt consolidation. However, the available loan amount depends on factors like the asset’s value, credit history, income, etc.
However, when applying for a loan against property for the first time, the individual must submit the necessary documents and check their repayment capacity, marketability of property, and CIBIL score. Nevertheless, here are certain tips for first-time applicants to help them understand how to apply for loan against property.
Tips for first-time LAP applicants
Before making a loan against property application, keep in mind the following pointers.
- Check your credit score
The first thing that you should do is check your credit score. A person’s CIBIL impacts their eligibility to get a loan sanction. This CIBIL score is a numeric summary of their payment and credit behaviour. Your credit utilisation ratio, FOIR, also indicates if you are credit-hungry. Hence, it is necessary to restrict debt utilisation to 30% of your total income to ensure a prompt loan approval.
- Evaluate eligibility
Another aspect that you must consider is the lender-specific eligibility criteria. Hence, to be eligible for a loan against property, you must meet the following criteria.
- The individual must be a resident of India.
- Salaried individuals must be employed at a private or Public Sector Company or an MNC.
- A self-employed individual must have a steady income source.
- Individuals must be between 28 and 58 years (for salaried individuals) and 25 to 70 years for self-employed ones.
Individuals can also use the loan against property eligibility calculator to estimate the available loan amount as per their credit profile.
- Submit the documents
Also, to be eligible for a loan against property, it is necessary to provide the following documents.
- Identity and address proof (PAN card, Aadhaar card, Voter ID, Driver’s license, utility bills or any government-approved ID)
- Self-employed individuals must present proof of business ownership, registration certificate, partnership agreement, if any, etc.
- Salaried individuals must present Employee ID.
- Proof of income and balance sheet or profit and loss statement for self-employed individuals.
- Copy of property documents and title deeds.
You should also know how to apply for loan against property after completing the documentation and comparing the interest rates.
- Interest rate
To opt for a lower loan against property interest rate, you can compare different interest rates and additional charges, including processing fees, prepayment charges, etc., by different financial institutions. Also, the type of interest determines the borrowing cost. Usually, fixed interest rates are comparatively higher than floating interest rates, as fixed rates remain constant for the entire tenor, ensuring better repayment planning. However, borrowers can access a loan against property interest rate calculator to find the EMI and total amount payable.
- Know the foreclosure norms
It is important to pay attention to the loan foreclosure norms necessary during a loan against property balance transfer. A loan balance transfer allows existing borrowers to service the outstanding debts at lower interest rates. However, they should know the formalities of foreclosing the existing loan account first that vary with lenders.
Selected HFCs also provide pre-approved offers on loan against property that simplify and expedite the loan application process. These offers are available on financial products like LAP, home loans, etc. Check your pre-approved offers by providing your name and contact details.
Therefore, besides knowing LAP details, including how to apply for loan against property, it will be easier for you to qualify for this credit. However, you should consider your repayment capacity while deciding the loan amount.