Financial needs are never planned & occur when you least expect it. Sometimes it could be when your child lands admission in a prestigious college abroad, and you need to fund their education. Sometimes it could be to tide an unexpected slump in business. In other instances, it could be when there’s a medical emergency. And taking just a personal loan might not be sufficient. In such situations, Loan Against Property (LAP) could be of great help. If you are sure that you’ll be able to repay the borrowed amount before the stipulated period, LAP would be the best way out. It is also considered as the cheapest secured loan in India and is one of the easiest ways to get funds immediately without any hassle.
This type of loan can only be availed if the borrower gives a guarantee by keeping his property as security. If you need a large amount to meet your immediate expenses, this is the best way out. Apart from the low-interest rate, its longer tenor and flexibility are some of the advantages of Loan Against Properties (LAPs). Reports suggest that the amount of loans taken against property is expected to double to Rs 5 trillion by 2019. In the next four years, it is set to grow 22% annually. But before you allocate an asset, there are certain things that you need to keep in mind.
LOAN TO VALUE RATIO (LTV)
Want to know how much you are borrowing? A Loan to Value ratio can tell you this. Loan lenders generally express the ratio of a loan to the value of your collateral. A higher LTV ratio might put you at risk as you’ll have less equity (ownership) in your house. In such cases, you’re more likely to default on your loan. This can give your lender a hard time and that’s why home lenders with high LTV ratios end up charging high mortgage rates. According to the recently changed RBI guidelines, the LTV ratio for home loans up till the value of Rs. 30 lakhs were raised to 90%. This has made buying a house in the affordable category easier.
The criteria might vary from one bank to another. But there are few common factors that all of them look at. This includes your income, debt obligations, savings, the value of the collateral, and your repayment track record. Salaried individuals who are permanent employees (above 24 yrs.), and self - employed professionals such as doctors, advocates, and engineers are eligible to avail a loan against property.
Secured loans are cheaper than personal loans as you are mortgaging an asset with the lender. Depending on your salary, the company you work for, and other parameters, the interest rate of your loan amount will be calculated. This could vary from one bank to another. According to your income, fix a smart repayment plan. In case you can’t afford huge EMIs at the time of borrowing, you can ask your lender to shorten the tenor and increase the EMI when your income rises. This will eventually reduce your loan burden.
Finding it difficult to avail a loan against property? Try Nitstone. When we avail a Loan against Property, the asset continues to be in the borrower’s ownership. In case of default payments, they can sell the property and settle the loan. This is one of the many reasons why we are the best online mortgage loan, provider. To avail Loan Against Property from us, click best online mortgage loan provider