There is a lot to consider when availing a loan against property. In situations of emergencies, individuals tend to opt for a loan against property without completely understanding the various factors involved n. To avoid such a scenario, we provide you with a complete guide on loans against properties.
What is a loan against property?
A loan against property, or a mortgage loan, refers to a secured loan that can be availed of by providing any asset as collateral. This asset can be a house, land, or any commercial property, and is kept as collateral with the lender until the loan amount is paid back (with interest charges).
With no restriction on how the loan is used, many individuals gravitate towards procuring such a loan. In fact, since these loans are accompanied by low-interest rates in comparison to unsecured loans, they are more in demand as compared to their counterparts. The interest rates belonging to loans against properties fluctuate between 8.45% and 22% per annum and have a maximum loan availing limit of Rs. 25 crores. Additionally, like most loans, you would have to pay a processing fee between 1% and 3% of the total loan amount, excluding the payment towards GST.
What are the factors that determine one’s loan against property?
There are several factors that contribute to one’s loan against property allowance.
Individual’s profile: Similar to all loan applicants, an individual is required to submit identity proof and other pertinent documents. This includes their income level, occupation, age, and full name among others. The Aadhaar Card of the individual is required to be submitted for verification purposes. Based on this information, a loan against property interest rate calculator will be used to provide you with a loan estimate.
Collateral type: The type of asset that is handed over as collateral needs to be scrutinised to assert its value. Based on the value of the asset, an interest rate will be provided to the individual. The higher the value of the asset, the lower the interest rate. Both the property registration (with its legality) and the market value of the property will be assessed as well.
Credit score: Your history with credit will be evaluated to understand whether you are likely to default on your loan repayments. A credit score of 700 and higher will result in the whipping out of a loan against property EMI calculator to compute your loan amount.
Loan tenor: Your interest rate depends on the period of your loan repayment. It is important to bear in mind that the shorter the loan tenor you opt for, the higher the corresponding interest rate.
Who is eligible to apply for the loan against property?
Different categories of individuals are eligible to apply for a loan against property.
Salaried workers: Individuals who earn a steady income, are at a minimum age of 24 years when taking the loan (this varies from lender to lender), and at the age of superannuation at the time of the loan maturity are eligible to apply for this loan. It must be noted that superannuation refers to a mandatory system whereby an individual sets aside a certain percentage of their income to support their future retirement. This includes all individuals who work for the government (as part of a permanent service) or a reputed company.
Self-employed professionals: Professionals in any job field can apply for this loan. Those self-employed professionals who are of a minimum age of 24 years when taking the loan and 64 years when the loan term matures can apply for a loan against property.
Self-employed businessmen: A businessman or businesswoman who files their Income Tax Returns (ITR) for their business is eligible to apply for this type of loan. The age criterion for this category of individuals is the same as that of self-employed professionals.
What are the loan against property documents required to be submitted?
To apply for such a loan, certain documents are required to be sent to the loan lender.
Identity evidence: Several documents in relation to this such as your Aadhaar Card, Voter ID, PAN Card, and driver’s license among others may be requested for submission. Additionally, proof of your date of birth will also be needed for verification.
Signature evidence: Evidence in the form of your banker’s verification may be asked for.
Address evidence: Property tax receipts and bill statements pertaining to your household’s utilities such as the gas bill, telephone bill and electricity bill may be required.
Income evidence: Extensive documents may be requested for submission when providing proof of income for the sole reason that it determines your interest rate, and loan repayment feasibility. Audited financial statements (with the CA’s approval), tax audit reports, and 6 months’ bank statements among others may be requested.
Summary and Conclusion
Above, we provided you with the ultimate guide on loans against properties. It is imperative that you know about these factors before you apply for a loan. First, be certain that you are eligible to apply for the loan and present the above-mentioned documents to ensure that your application gets processed without any hassles.