How to use Loan against property to one’s advantage

Loan Against Property

Purchasing a house is an indicator of our financial stability. Experts believe that the pursuit of buying a house ends up restricting the buyer’s financial ability. However, very few experts tell that the house can be utilized in a wise manner. This blog posts try to shed light on how you can use your house to achieve your desired financial goals.

Loan against Property

Loan against Property (LAP) can be defined as a form of secured loan received from a bank or a financial institution by mortgaging one’s existing property. LAP can be used for meeting requirements for such as launching a new business venture, its expansion, pursuing higher education, medical expenses, working capital requirements etc.

LAP, which can be applied individually or jointly with other persons or legal entity, can be taken as term loan with fixed EMI or as an overdraft facility. As an OD, LAP gives the much needed flexibility by helping meet the fluctuating requirements of capital in a business. While LAP has no upper cap on the amount of loan to be applied, the amount is ascertained by the banks as per the market value of property and repayment capacity of the applicant. The loan to value ratio normally tends to vary from 45-90% of the property’s market value and can be availed against residential, industrial and commercial property including a warehouse or a land parcel.

We will show how one can avail a LAP

Eligibility  :   Eligibility for the loan is decided on criteria such as age, income etc. The eligibility can be ascertained by checking the same or by visiting the bank’s website.

Choose the right lender    : One can choose one’s lender by comparing fundamental parameters like interest rates, application fees, processing fees and legal charges of different banks.

Application : On selecting the lender, the applicant has to fill the application form providing information about financial assets and liabilities; property details and other personal and professional details.

Documentation : LAP applicants are mainly for the self-employed segment and necessary documents are needed for income assessment.

Checking CIBIL score : The credit history of the applicant is checked through CIBIL score. The CIBIL score goes a long way in whether the customer receives the loan or not.

Technical and Legal clearance : Before approving the loan, the property documents are legally authenticated as the same acts as the security against the loan. Second is the valuation of the property determining the loan amount to be given as collateral.

Issue of Sanction letter : After the credit appraisal, the sanction letter is issued to borrower giving details like loan tenure, repayment options and rate of interest which has to be duly accepted and sent back to the lender.

Disbursal : At the end of all the above procedures, the loan amount is disbursed with the assurance that the same will be repaid within a stipulated timeframe. Businesses can use this loan instrument to make the most of their respective business ventures.