According to a report, there has been a 20% growth in loan against property demand in India in H1 2021. This growth can be attributed to the demand for credit due to current economic conditions and the feasible interest rate.
However, borrowing requires systematic planning and an evaluated approach. This includes checking the variables linked with the credit form and its types.
For instance, a potential borrower must know the types of loan against property and the factors affecting the loan approval.
What are the essential factors to check for LAP application?
A loan against property is a lucrative credit variant for individuals needing substantial funds. This secured loan variant comes with the flexibility of use, which makes it ideal for big-ticket spending.
Hence, individuals can complete their urgent expenses such as paying medical bills, liquidity needs, wedding expenses and more.
Individuals can go for this loan to leverage the equity of their residential or commercial property.
Additionally, they should check the factors facilitating easy loan approval. The factors that a potential borrower must check are discussed below.
- Credibility
The credit score and repayment history of an individual can significantly impact LAP borrowing. Ideally, lending institutions conduct a hard inquiry every time an individual makes a loan application.
This assessment is a part of their protocol to check an applicant’s reliability and repayment capability.
Lenders regard individuals with a 750+ CIBIL score and good repayment history ideal for loan approval. These borrowers are also eligible to receive better terms and affordable repayment facilities.
Potential borrowers must maintain a spotless credit report. Additionally, they can practice certain ways such as making timely payments, clearing dues, part-prepayments, etc., to improve eligibility.
- Repayment tenor
Every borrowing, irrespective of the loan variant, ties a borrower into a repayment structure. Failing to identify the terms that suit one’s financial capability can lead to debt traps.
In this regard, a potential borrower must choose the repayment tenor carefully. They should evaluate their financial strength and opt for a repayment term accordingly.
For instance, opting for a long tenor brings down the EMIs, simultaneously impacting the loan against property interest rates. Comparatively, a short tenor would reduce the overall interest and aid in making a substantial saving on disposable income.
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- Tax benefits
Apart from gaining information on the ways to make the repayment hassle-free, potential borrowers must check the tax benefits. This will help in leveraging the scale of the savings.
For instance, individuals can gain tax benefits on the interest paid under Section 37 (1) of the Income Tax Act. Moreover, Section 24 of the Income Tax Act allows a tax benefit of up to Rs. 2 lakh on the interest paid on loan against property to purchase a non-residential property.
- Reliable lender
Potential borrowers must find a reliable loan against property lender for successful borrowing. The loan market is filled with options where most lenders try to lure customers with attractive deals.
Falling prey to these claims can lead to repaying a high interest rate or additional costs. Hence, finding the right lender becomes crucial to get the best terms.
One can check third-party sites or compare the features to find a compatible lender. For instance, they can find HFCs offering customised features such as pre-approved offers that make loan applications easier and hassle-free.
These offers are available on financial products like a loan against property, home loan, etc. Individuals can check their pre-approved offer by providing a name and phone number.
- Additional charges
Almost all lending institutions levy certain charges for processing the loan. It is essential to understand the charges and estimate the total cost of borrowing. A potential borrower can consult a lender and ask them the rates.
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It will help maintain transparency in the entire process. An individual can also understand their repayment capability and make a decision accordingly.
There are also charges such as foreclosure charges, processing fees, prepayment fees, etc.
Additionally, potential borrowers must check the eligibility parameters and documentation to streamline the application process. Being a secured credit form, the lenders set simple eligibility parameters and simple documentation.
These are some of the essential factors related to loan against property that potential borrowers must evaluate for informed borrowing. For easy approval, it is recommended to improve eligibility and reduce the debt to income ratio.