Are you on the lookout for the best financing option that allows you to utilize the underlying equity of your assets while offering the freedom to use funds for the desired need without restrictions? Well, under the current ambit of financing options, we can’t think of a better credit avenue than a loan against property. These secured advances come with a range of financing benefits that you can utilize while ensuring easy repayment over the long term. Plus, the loan against property eligibility requirements is simple too, which means you do not have to face much hassle and avail funding if you fulfill certain criteria.
Nevertheless, it is always prudent to take care of all the related aspects of a property loan before applying for the advance. It should depict a clear picture of the liability generated and the repayment schedule you need to stick too along with important aspects like affordability.
Here’s a look at some of the important ones.
Loan Against Property Eligibility and Paperwork Requirements
Funding under loan against property is backed by asset collateral, which makes this loan less risky for lenders than any other unsecured funding option. This allows the lender to keep only a handful of eligibility requirements that an aspiring borrower must meet to avail funding.
Some of the standard loan against property eligibility requirements you may be asked to meet to avail a property loan include the following.
- Occupation: You must be either a salaried or a self-employed individual to be eligible for the advance.
- Financial stability: You must be employed or be running a business for not less than 1 year in general. For salaried applicants, the minimum work experience in the current organisation for financial stability determination is 6 months.
- Age: Your age eligibility differs with your occupation. Usually, salaried individuals need to be in the age range of 25 and 55 years for the loan. In the case of self-employed applicants, the eligible age range is between 21 and 62 years.
- Location of property: With some lenders, you might also be required to own a property in one of the cities listed by them.
- Property value: Depending on your city of residence, the property valuation must meet the minimum requirement, which usually starts with Rs.15 lakh.
- Citizenship: You must be a residing Indian citizen with a stability of 1 year for the loan.
Along with these loans against property eligibility requirements, you also need to complete the necessary paperwork for the application processing to begin. Following are some important ones.
- KYC documents, which include your proofs of identity and address
- Proof of occupation, which includes employee ID card issued by the employer or employment certificate for salaried individuals; in the case of self-employed, any certificate confirming business registration would suffice
- Proof of required experience
- Income proof such as bank account statements, income tax returns filed for the required number of years, etc. For salaried individuals, salary slips, and income certificate are acceptable too while financial statements of the business work for self-employed applicants.
- Property documents also need to be submitted to ensure ownership and clear title to the asset.
Plus, you may be asked to provide any other document as asked for by the lender along with the duly filled-up application form.
Types of Property Eligible
Not all assets that you own can be utilized to raise funding as loans against property. Following are the eligible asset categories that lenders consider as collateral for the purpose of financing.
- Self-occupied residential property
- Let-out residential property
- Commercial property like shop, retail outlet, etc.
- Land (Except agricultural land)
- Any other fixed asset that is excluded from the above categories
If you have two residential properties and you are planning to utilize one of them for raising funds, it is wise to extend the let-out residential property as collateral so that your house remains safe from any claim. Note that the financing value would differ with each type of property that is eligible for collateral creation.
Tenure and Available Repayment Options
As a long-term advance, the tenure for a loan against property easily extends for over a decade. With some of the best lending institutions and depending on your eligibility fulfillment, the repayment tenure can extend up to 20 years, which allows you to choose an EMI as per your affordability without straining your personal finances. Make sure that you use a property loan EMI calculator to estimate a suitable tenure based on affordability before finalizing your borrowing decision.
You only need to provide a handful of loan details to the calculator for prompt computation. Fill in the loan amount, interest rate applicable, and choose a suitable tenure for the EMI payable to display. You can alter the tenure and loan amount values to toggle with the EMIs and arrive at a suitable term accordingly. Along with this, the calculator also allows you to make various other loan assessments that help with optimal repayment planning.
As for the repayment options, you get the flexibility to choose a suitable EMI for repayment, which need not necessarily be the minimum mandatory value if you have the necessary funds available. Then, you can go for prepayment options as well, which primarily include foreclosure and part-prepayment. Either of these can be availed against low to no charges at any time before the tenure ends, but only after payment of a stipulated number of EMIs.
In the end, you must consider the interest rates and charges applicable to the property loan selected and find out ways that can help reduce the overall cost of the loan. Note that even if you meet all the loans against property eligibility requirements, the funding available is limited to the LTV or loan to value ratio decided by the lender, which is the percentage of a property’s market value available for maximum financing. So, make sure you check with your lender the applicable LTV on property loans, which can go up to 90% based on the property’s condition.
