Loan Against Property In India: A Brief Overview

A loan against property in India is not very common. In fact, the concept of loan against your home is taboo in most Indian communities. However, the fact remains, that property is a valuable asset and you can certainly use it to your advantage instead of opting for a humongous and unaffordable personal loan or a credit card debt. Thus, here is what you need to know about the loan against property in India .

What is a loan against property (LAP)?

This is a secure loan against an asset, pretty much like any other loan against assets. The interest rates for a LAP are lower than for unsecured loans like personal loans. The primary eligibility criterion is the value of the asset rather than the repayment ability or credit score. So, thisis much easier to avail for people, who are financially challenged at the moment.

What are the consideration factors for loan against property in India?

You will need to complete the standard loan application process with the required documents. You will also need to meet the eligibility criteria of the lending company. Nonetheless, when you apply for a loan against property with a housing finance company or a bank, you must do so with due consideration to the following factors:

• You will need to give time to the lenders in order to process the market value of your property, which varies from 5 working days to 2-3 weeks, based on the lending organization.

• The loan amount depends on the third party analysis conducted by the housing finance company. You will receive approximately 80% to 85% of the market value of the property, which will be decided by the lender.

• You can negotiate for competitive interest rates on the loan against property, if you have the required documents to demonstrate good repayment ability and credibility.

Thus, you can also receive a higher loan amount at lower interest rates by opting for loan against property. Additionally, you can enjoy more relaxed repayments as the monthly EMIs will be lower.

When is the right time to apply for loan against property?

In one sentence, when the loan amount is much higher than you can easily borrow. It is not advisable to risk your property unless there is no other choice available. If you can take a loan against shares, fixed deposits, gold or luxury items, you should. The cost of property is the highest among the several assets for most individuals. So, take a rough estimate of the market value of the property and if it is approximately the amount you need, then apply for loan against property. If you have other assets available, do include them in your consideration.

A Complete Guide To Understanding Home Loan Interest Rates

Home loan rates can be a complicated plateau to manoeuvre through. There are, however, a few major factors that do stand out. This guide should help you to screen through the major sections that need to be kept in mind about this subject:

Types of interests

This section may seem basic; however, it’s not. There are three types, obviously. Yet, you need to know some of the important aspects that may affect your EMIs and the repayment structure in the long run.

• Fixed rates: These rates are higher and so are the hikes after the first few years. So, you should know when your interest rates will elevate again. If you opt for fixed interest rates, you should aim to increase your earnings accordingly.

• Floating rates: These are vulnerable to economic fluctuations. They can work in your favour if they lower over a certain period of time, though you must know that the tenure for home loan repayments stretches from 20 to 30 years. Unless you earn a significant income over the course of the years to pre-pay the loan, you will be paying EMIs for that duration and may also face unexpected recession and interest rates hike twice or thrice in that period.

• Hybrid rates: These rates combine the best of fixed and floating. You make two home loan agreements that divide your home loan into two types of interest rates and repayment plans. Though it seems like the best of both worlds, you need to understand that it can backfire too. You need to read the home loan agreement papers and the fine print carefully and protect yourself against any backfires.

The factors that influence your home loan interest rates:

All applicants may not be able to get the advertised rates. Very few people, in truth, are in a position to avail the best home loan rates in India. Although you can influence home loan proposals to get the best possible interest rates for your housing loan. So, what are these factors?

• CIBIL credit score
• Repayment ability
• Company appraisals
• Employer
• Annual earnings – income, assets and liabilities
• Any other loans
• Your interest rates negotiations

There are always more factors that can come into play, depending on how you choose your house loan package. So, it makes sense to make an effort to mould all these factors in your favour. It is not always possible to transform them all; yet, if you take an expert’s advice and use it to your advantage, you can potentially get much lower housing loan interest rates in India .

The Benefits Of A Home Loan Balance Transfer

A home loan balance transfer is a mere financial service to avail certain advantages that you previously didn’t. Any smart borrower should be able to determine if the transfer is worth the expenditure. Otherwise, it may turn out to be a very expensive choice. This is a primary reason why financial experts do not suggest opting for a home loan balance transfer in the last 2 to 5 years of the housing loan tenure. Hence, every borrower must identify the vantage point for his or her Home Loan before considering a transfer.

Lower interest rates

When you opt for a housing loan with certain interest rates, you may gain an advantage by shifting to another housing finance company, which offers much lower interest rates. For most borrowers, who have made well-disciplined repayments, it can be a huge save. This kind of ideal home loan transfer is a profitable choice based on the home loan offer received. So, make your own calculation before making the decision, though.

No prepayment charges

A lot of borrowers do not want to pay the applicable prepayment charges for Home Loans with fixed interest rates. If the new housing finance company allows you to repay your loan in a lesser home loan tenure, you can save a substantial amount of interest. That can make it a smart move, based on the other costs incurred in the home loan transfer, though. So, you must calculate the savings against the expenses incurred before signing on the dotted line again. Most borrowers forget that this is the same home loan process – you will need to meet the home loan eligibility criteria, you must submit the documents required for home loan and you will need to pay the processing charges, service taxes etc. Hence, you must include all these expenses in your calculations.

Loan restructuring options

Some of the housing finance companies in India deny two types of home loan restructuring that you may need as a borrower; extra money for home renovation, and extending the home loan tenure as the current floating or fixed interest rates may be too high for easy repayments. Sometimes, housing finance companies fail to take this into account and make the necessary changes. It is perfectly alright to seek an alternate lender. Even if your current lender fails to offer the restructuring, you still will need to get a NOC (No objection certificate) from them, because no housing finance company will complete the home loan process otherwise. It is a much needed move; though, you must make it cautiously.