According to the report published by a market research firm, secured credit like loan against property is anticipated to grow at 14% and achieve a valuation of USD857.87 billion by the end of 2026.
One of the foremost reasons behind this substantial growth is the affordable interest rate and flexibility of fund usage. However, to avail a loan against property, one must consider the crucial factors to ensure a hassle-free repayment throughout the tenor.
Factors to consider before opting for a loan against property
Just like the name suggests, a loan against property is secured and featured with a high loan quantum that can be used to meet any personal or professional requirement. Besides, this credit facility is considered a debt consolidation loan. The funds can be utilised as a Flexi Loan to establish a business, finance higher education, meet medical expenses, etc.
But before customers avail loan against property, it is important to check out the factors below:
- Comparison of lender and interest rates
Every financial lender lays down certain guidelines before sanctioning a loan amount. To qualify for the credit successfully, one needs to meet specific eligibility requirements. Moreover, to ensure obtaining a cost-effective loan, individuals must compare the offerings of the lenders. When comparing, one should go through the hidden loan terms and conditions.
Besides, the interest rates will vary from one lender to another, involving factors like age, current income, employment status, credit score etc. When considering a mortgage loan, one must acquire the most affordable loan against property interest rate against his/her pledged property. A little difference in interest rates can significantly impact one’s repayment capability.
- Loan quantum
In the case of a loan against property, the sanctioned loan amount depends on the market value of the mortgaged asset. Usually, an individual can obtain around 40%-80% of the property’s current market value as a loan. However, factors like property’s age, location etc., are also the factors that can influence the loan amount. Therefore, if you are seeking a high loan amount, it is wise to conduct thorough research and settle for a lender offering the best value of the property.
- Repayment flexibility
While seeking any credit facility, be it LAP or any other financial product, it is essential to determine the repayment tenor beforehand. In the case of a mortgage loan, financial lenders allow borrowers to select their repayment tenor. However, one should remember that opting for a longer tenor may reduce EMIs, but the overall borrowing increases. This is because they need to pay interest rates in a compounding manner throughout the repayment period.
- Processing fees and associated charges
Servicing a credit often comprises paying additional charges and processing fees. These extra charges can also increase the overall borrowing cost, and hence it is crucial to factor in them in advance. Leading financial institutions often impose processing fees for completing the applicant’s personal and professional details verification process. Although these charges seem like a small amount, the accumulated cost of these charges will significantly make the loan expensive and repayment difficult.
Apart from these, borrowers must not forget to consider the loan against property eligibility criteria. Ideally, this pointer differs from lender to lender, but it is essential to understand before proceeding with the loan application. Meeting the lender-specific eligibility will allow applicants to avoid the chances of loan rejection.
Moreover, borrowers can also avail loan against property tax benefits based on the usage of funds. Under Section 37 and 24, borrowers can claim tax benefits on the interest paid against their loan amount.
In addition, one can consider the availability of pre-approved offers provided by leading financiers on a wide range of financing options. Offers like these ensure eliminating the hassle of lengthy loan applications and documentation. Therefore, customers can check their pre-approved offers by mentioning their name and contact information.
Thus, the benefits associated with LAP make it a viable option for borrowers. However, applicants must consider these factors before planning to avail a loan against property to ensure obtaining an affordable credit.