In India, getting money when you need it the most is not challenging. You can contact a lender, browse the various loan offerings, and pick one which suits your requirements.
Out of all loans that Indian lenders offer, a loan against property, or LAP loan, is the most uncomplicated, straightforward, and attractive. However, to make the most of a LAP loan, you should consider the following factors.
LAP Loan Interest Rate
LAP loan interest rates start from 9.50%, and the maximum interest rate is capped at 10.65%. However, that's the case with PNB Housing Finance. In the Indian lending industry, each lender has its own way to beat others. Hence, you should browse the interest rates of various lenders and pick the one that comes with many benefits. Remember that the LAP loan interest rate is just one among many parameters you should look for while choosing your lender.
Loan Amount
The LAP loan amount depends on various factors like the age of the property you wish to mortgage, its legal status, the location, geographical stability, and market value. Moreover, they look at the borrower's credit profile, income, credit history, and credit utilization ratio to decide the loan amount. Usually, lenders in India approve a LAP loan amount of up to 60% of the property's market value.
Loan Eligibility
The approval of a LAP loan depends on a few factors like the property ownership status, the credit score of the borrower, age, income, and the debt-to-income ratio. If you have too many loans in your name, approval of a LAP loan will be challenging. However, you can always include someone else, with a stable income and decent credit score, as a co-applicant. Any enhancement in the eligibility will also enable you to get better LAP loan interest rates.
Loan Tenure
LAP loans often come with a repayment term of twenty years. That being said, if you choose the maximum term, your LAP loan interest rate will be the highest. On the contrary, if you select a short term, the EMIs will increase; but, in the end, you will save more as interest.
Loan Fees
While most borrowers look for a lender who is offering the lowest LAP loan interest rate, they often overlook the need for going through other charges. A lender who offers predatory interest rates will often have higher loan application fees or may charge a hefty penalty for part-prepayment or foreclosure of the LAP loan. Hence, before you select a lender, check the loan application fees, foreclosure charges, etc.
Tax Benefits
While this does not have anything to do with the lender, knowing the tax benefits in advance can help you to select the right Loan against property amount. A LAP loan allows you to save taxes under two sections of the Income Tax Act - Section 37(1) and 24(B). You may claim a tax deduction on the interest component if you use the LAP loan amount for business purposes. And, if you use it for house construction or purchase, you may claim a tax deduction on the interest.
Conclusion
LAP loan is a long-term liability. Invest some time and browse various lenders before picking the right lender. That way, you can learn exciting things about loan against property and empower yourself as a borrower.
