There may be times when we need a surplus amount of money to fulfil a requirement. Popular financial instruments like loans can prove to be of major help.
In case of major financial needs, a loan against property is a viable option. It is a loan that can be obtained by pledging your property like a house or land as collateral. Most financial institutions today offer loans against property. However, while applying for this loan, you need to keep certain factors in mind and check for a few things beforehand. Since your property is involved, it is important to be well aware of the application procedure and benefits the loan offers.
Check for Loan Tenure
Loan tenure or repayment period is the duration over which you will pay the loan in the form of Equated Monthly Instalments (EMI). Typically the tenure for Loan Against property can go up to 15 years. You must take into consideration, your current budget and expenses to decide your repayment capacity. Since an EMI consists of the interest component along with the principal amount, you need to consider the factor too. Longer tenure leads to a lesser interest rate and shorter tenure will come with higher interest rates.
Well, this is a factor that you just can’t ignore because as mentioned earlier, you will need to pay the interest amount along with the principal amount as EMI. The interest rate depends on various factors such as loan amount, repayment tenure, credit score, your repayment history etc. So ensure your repayment track is clean.
Also, before you apply, you can compare the interest rates offered by various banks to check which one will best suit your requirement. If you have had a good relationship with the lender, there are chances that you may be offered a lower rate of interest and relatively a lower processing fee.
This is essentially the time taken by the lender to transfer the money to the borrower after the application is approved and verified. Preferably, you would want to select a lender who will provide you with the loan amount in the shortest time. Before that though, keep a tab on the lender’s credibility.
Check your Credit Score
The credit score is a factor that showcases your ability to make repayment on time. In short, it reflects your creditworthiness. To have a good credit score, you must have a good repayment history and you must not have defaulted on payments, have no debt and paid your bills on time.
These practices will help you boost your credit score. A good credit score will not only give you the confidence to borrow but also assures the lender that you can be sanctioned the loan without them having to worry about repayments. With a poor credit score, there are strong chances that your application will be rejected. This will also harm your financial reputation and create a dent in your credit profile. So ensure you have a credit score report check, before applying for a loan against property.
Check the Eligibility Criteria
To avail a loan against property, you must fulfil the eligibility criteria set by the financial institution. The eligibility criteria can vary to a certain degree, depending upon the financial institution. The parameters basically centre around factors like age, demography, income/annual turnover, work experience/business vintage etc. You will be even asked to furnish a certain set of documents which may include address proof, income proof, identity proof, property-related documents etc. Ensure you have the documents and you fulfil the eligibility criteria so that your loan does not get rejected.
Thus, this is a basic checklist you must reckon before applying for a loan against property.