Loan against property or LAP is a lump sum yet secure loan process procured to meet purposes like medical emergencies, personal needs, education, or businesses. Banks and lenders offer loans by considering a property as collateral. Since the surety here is a property, the granted amount from LAPs is more than the others. Check out and know all about LAP.
Availing for a LAP is relatively easy these days. However, certain things need to be put under consideration before proceeding with the application. Once you understand these, the process will be entirely smooth and hassle-free.
Value of the Property
Be it a residential property or a commercial one. You need to be aware of its monetary value in the market. This is because the grant amount will never be more than the property’s value. Instead, you are given nearly 70 to 90 percent of the worth as per the LTV (Loan to Value).
In case you’ll need Rs. 20 Lakhs, but the property costs Rs. 18 Lakhs; you cannot get the required amount. You’ll then have to reconsider other alternatives. So, know the worth of the property you are trying to use against the loan before proceeding with the LAP.
Co-Applicants for the Loan
There is a facility to avail LAP along with a co-applicant. These situations usually happen when a person alone cannot repay the EMIs and need assistance. In that case, banks or lenders allow a co-applicant of your choice. They perform a couple of necessary checks to validate the co-applicants capability to pay back the monthly installments, and the job gets done.
Co-applicants work the best when the loan amount is huge or if the chosen EMI plans are more. Banks usually try to limit the EMIs to 60 percent of the total income. If you wish to pay more and clear off the loan soon, use the co-applicant option.
Income and Repayment
LAPs usually come in when the requirement is in bulk. However, their repayment time is up to 15 years. So, banks and lenders consider the applicant’s repayment capabilities and income statements in the first place. As mentioned earlier, the EMI cannot be more than 60 percent of the total income. So, the entire loan tenure and sanction amount will depend on the applicant’s income.
Unless you earn sufficiently good enough, LAP isn’t that easy to avail of. Banks and lenders usually prefer making people with a fixed income source who can pay the EMIs consistently without many defaults. This way, banks no longer need to recover the LAP by selling off the property in case of non-payment.
Property’s Ownership and Documents
In most cases, the problem arises when there is a co-owner to your property. If you are the sole owner and willing to acquire a LAP, there won’t be an issue unless you do not submit all the necessary documents. However, if the co-owner doesn’t agree to the loan or if the property is involved in some family or external disputes, it isn’t easy for your LAP to be sanctioned.
Banks or lenders ask for crucial documents and bills related to the mortgaged property. In case the documents are not up to the mark, there are chances that the request might get nullified.
Another influencing aspect of a LAP is your repayment history. Banks and lenders will never miss this aspect, as it offers a clear-cut view about your ability to repay the bills. Ensure that your payment history is all clear so that your chances of getting a LAP improves.
It might be difficult for applicants with an existing liability or another loan to get a LAP approved. Some lenders and banks also check for the number of people depending on you. If this number is more, it is taken that the repayment capacity is low.
Compare Different Lenders
Most people usually pay a lot more than their LAP. Either they aren’t aware of different banks and lenders or feel that the present lender is safe. Of course, you need to consider safety, but make sure to go through the available list of trusted banks and lenders out there offering LAPs at lower interest rates.
Almost everything is online and abides by the law nowadays. So, instead of considering security alone, check for other factors like interest rates, loan tenure, EMI flexibility, processing fee, prepayment and foreclosure charges, LTV, penalties on late payments, etc.
Don’t let your dreams and needs crumble by not paying proper attention to the details. It is always essential that you have considerable knowledge before proceeding with a LAP or any other loan. Or else, it could lead you to pay more than required.