Experts consider a loan against property to be the most secured loan. But as the loan involves higher sums of money and the repayment tenure is longer. An informed decision is a must.
Anyone can face a sudden urgent need for financial assistance. In this situation, your first thoughts are to obtain a loan to tide you over your crisis.
In this case, you can offer your property as collateral and secure the loan. The main advantage of a loan against property is that you don’t need to sell the property, only pledge it. That means you unlock its value while you continue using it.
But it isn’t free of risks— the main risk is when you fail to repay the loan within the appointed time. In such a situation, the lender gets complete authority over your property. What was yours now becomes theirs. They can recover the loan by selling your property or restructuring the loan.
Take a rational decision after you consider the factor that affects it.
Factors To Consider Before Choosing A Loan Against Property
When the loan against property interest rate is lower, the EMIs are affordable. There are certain factors that lenders consider before they offer you loans at lower interest rates.
1. Tenure of the Loan
One of the factors to consider before deciding on a loan against property is its tenure. With a shorter period, you will save money by way of interest. But a longer one will increase your chances of loan approval. Choose between longer or shorter tenure as per your requirement and capacity to repay.
Age is foremost in the decision on the tenure of the loan. If you are young, the lender will be happy to grant you a loan against the property for a longer period. But if age is not on your side, the lender reduces the tenure.
2. Condition of the Property
Lenders use guidelines to judge if the property is old or new. Old properties have a lower value. The loan tenure cannot exceed the age limit fixed by the lender for the property. If the property is new, in good condition, and recently renovated, you have a better chance of loan approval.
3. Salary Statement or Income Tax Returns (ITR)
The lender wants to know for sure that you can repay the loan. You must submit your three months salary slip and six months bank statement along with Form 16 (for two years) if you are a salaried employee.
Non-salaried borrowers must submit their ITRs of three years before loan application. If you cannot furnish them, establish your creditworthiness by showing your steady income stream. Submit bank documents to back your claim.
4. Choose Between Fixed And Floating Interest Rates
Choose the loan against property interest rate; It could remain fixed throughout the loan tenure or vary by changing market conditions.
5. Choose Your Lender
The lender will charge you a processing fee, GST, and other charges to grant you a loan. Know the charges to ascertain what the loan will cost you. Compare the rates with those of the other lenders to decide on one that is best for you.
Securing a loan is not difficult. But, getting the one that is right for you can be challenging. In this case, it is good to learn about the factors that lenders consider with loans against property.
Making an informed decision in this matter will help you in obtaining a loan that does not burden you.