Taking a loan against your property? You must be aware of these things

By: |
March 15, 2021 10:21 AM

Banks check records such as payment-track records, repayment ability of the borrower before approving a loan. Hence, if one has other loans or existing liabilities, his/her eligibility for another loan decreases.

Home loan, interest rates, SBI, ICICI, CIBIL score,, home loan, home loan interest rates, Lowest home loan interest rates, latest home loan interest rates, cheapest home loan, latest home loan rates offered by 20 banks, Floating-Rate Home Loan Interest Rates, SBI, HDFC, ICICI, Axis Bank, PNBLoan against property does not provide any tax benefits, unlike home loans that provide a tax benefit.

Loan against property (LAP) is a commonly-known concept, wherein you can borrow large sums of money against your property. It is a secured loan that can be taken for funding various purposes such as medical emergencies, child’s education, business-related purposes, weddings or other personal needs.

Most banks offer these loans for a relatively larger sum of money as properties are used as collateral. Usually, the amount of loan that banks approve depends on the borrower’s income so that the EMI the borrower has to pay does not exceed 60 per cent of his/her monthly income.

Here are some things to keep in mind while taking a loan against property:

  • Banks check records such as payment-track records, repayment ability of the borrower before approving a loan. Hence, if one has other loans or existing liabilities, his/her eligibility for another loan decreases.
  • Additionally, a few banks also take into consideration the number of dependents of the borrower because more dependents are considered as lower repayment capacity.
  • Experts say one should compare the lenders before choosing a lender for their LAP, as these loans are of a higher amount and have a long tenure. Do not limit your research to just the interest rates offered, other parameters such as foreclosure charges, processing fee, prepayment charges, late payment penalty and loan to value ratio should also be considered.
  • Avoid over-leveraging your loan as it can result in loan default and you can end up losing your property against which you have taken the loan.
  • Keep in mind that your loan request could be turned down if the property being offered as collateral is disputed, as banks do not approve a loan request if the property taken as collateral for a loan is under dispute or the property papers are not clear about ownership.
  • Usually, these loans are available for longer tenures of up to 15 years and with speedy approvals, flexible repayment options, the documentation for a loan against property is relatively easy.
  • The loan can vary from Rs 5 lakh to Rs 500 crore, and the tenure can go up to 15 years. The loan to value (LTV) ratio is normally restricted to 50-60 per cent of the property’s market value.
  • Loan against property does not provide any tax benefit, unlike home loans that provide a tax benefit of up to Rs 2 lakh per year on interest repayment and Rs 1.5 lakh on principal repayment.

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