What Are The Dos And Don’ts Of A Loan Against Property?

A loan against property is one of the most secure forms of credits available in the financial market. You avail a loan against the current market value of your property which in turn is mortgaged till repayment of the loan. The property can be your residence, a plot of land or a commercial place. Only if you default on the repayment will the lender liquidate your assets to recover its outstanding dues.

Basic Pointers Of A Loan Against Property

As loan against property is a secured loan, the lending rate is typically low as compared to other forms of credit. The loan against property eligibility criteria varies between different financial institutions. But usually, the eligibility requirements to avail a loan against property is liberal as the lender has hold of your property as collateral. You can avail a Loan Against Property from NBFCs like Bajaj Finserv and avail up to Rs. 1 Crore to Rs. 3.5 Crore as loan amount for salaried and self-employed professionals respectively.

You can enjoy the lowest loan interest rates in the market and flexible repayment tenors of up to 20 years. Furthermore, there is no end-usage restriction in case of loan against property. Therefore, you can liberally use your loan amount to fund a variety of requirements like –

  • Expanding a business operation
  • Financing your child’s higher education 
  • Bear your son’s/daughter’s wedding’s expenses etc. 

Bajaj Finserv also brings you pre-approved offers on secured advances like home loans and unsecured credits like personal loans, business loans, as well as numerous more financial products. These pre-approved offers ease the process of availing finances and save time as well. 

Now that you have a preliminary idea of what a loan against property is, let’s keep a check on the do’s and don’ts of a loan against property –

Do’s: 

  • Ensure You Meet The Loan Against Property Eligibility Criteria 

Financial institutions and NBFCs require salaried professionals to be aged between 33 to 58 years of age. For self-employed individuals, the age limit is a bit relaxed, ranging from 25 to 70 years. 

You can use your lender’s loan against property eligibility calculator before availing a loan against property. Also, bear in mind that salaried professionals must be employed at a public or privatised enterprise. A self-employed customer needs to run a registered business and must be able to show a stable source of income.

  • Keep All Your Personal Documents At Hand

The loan against property documents required by NBFCs and financial institutions includes –

  • Valid photo identity proof
  • Address proof
  • KYC documents like PAN card, Aadhaar card, etc. 
  • Bank account statements
  • Salary slip and income tax returns as salaried professionals.
  • Income tax returns, proof of business and profit & loss balance sheets audited by a CA as a self-employed individual.

You will also need to provide requisite property documents. Typically, financial institutes and NBFCs demand the following documents –

  • Property registration
  • No objection certificate from your local councillor
  • Property plan or blueprint, etc.

Producing these property documents can help you avail the loan quickly.

  • Reduce Your Fixed Obligations

NBFCs and financial institutions prefer customers who have a monthly FOIR (fixed obligation ratio) below 50% of their total income. Lower FOIR means that you are more financially capable to meet larger EMIs and therefore are eligible for a larger loan amount.

  • Maintain A Creditworthy Financial History

A borrower’s credit report reflects his/her credit history. This report demonstrates the number of loans availed by an individual, repayment history, credit limit usage on card/s, credit inquiries, etc. CIBIL score requirements vary from lender to others. 

If your cibil score is lower than you must have to know how to increase cibil score for getting the loan in an easier way. Use your lender’s loan against property eligibility calculator to increase your chances of rapid approval and disbursal.

Don’ts:

  • Apply for a loan against property in India with multiple existing loans.
  • In case the pledged property is your residence, then owners must not let it out.
  • Never avail another loan against property already pledged as collateral for an existing Property.

The advantages of a loan against property are immense. Apart from these do’s and don’ts, you must also know how not to default your loan against property to reap its full benefits as well as better terms on future financial products.

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