If you are looking out for secured loans, a loan against property is the right choice. It has also gained popularity recently as it is being widely used for various purposes. LAP is a multi-purpose loan and can be received from banks and financial institutions. For availing of this kind of loan, one needs to use a property of their own as collateral.
You must also keep in mind that the market value of your property will determine the LAP you can obtain. But before you use your property as collateral, make sure you have the necessary documents handy. And if you are in dire need of significant funds, you will go for LAP. But there are certain factors that you need to consider before you apply for LAP. Keep on reading to know more about it.
● Consider the Loan Amount that You Require
Whenever you opt for a loan against a property, the market value of your property will determine your loan value. In most cases, people get around 40 to 80% of the market value of their property. Sometimes the valuation also depends on the lender.
But if you are looking out for a substantial amount of loan, you can shop around for some time. Consult with lenders, banks, or financial institutions and compare the proposed loan amounts. If you successfully find someone providing enormous loans, you are good to go.
● Consider the Rate of Interest that You are Being Charged
You need to pay an interest rate with the original amount whenever you opt for loans. However, the interest rate will vary from lender to lender and other factors. Before the lender fixes an interest rate, he will check your income, credit history, tenure, and loan amount.
So whenever you are opting for a mortgage loan, check twice to see if you are getting a reasonable offer. Take some time out and do considerable research on the amount of interest rate. It is always better to associate with that lender, whichever you find affordable. This will affect your ability to repay the LAP in the long run.
● Look Out for the Repayment Tenure of Your Loan
Most financial institutions fix fifteen years as a repayment period. The longer your loan tenure, the smaller your EMI becomes. Additionally, it increases your affordability.
But you must also remember that interest rates on loans are calculated in compounds. So, a longer tenure will also inflate the borrowing cost, thereby making you pay more in the long run.
● Check Out the Processing and Additional Charges
Sometimes LAPs also have additional processing fees associated with them. So you must consider them and check thoroughly. Some lenders impose statutory charges, service charges, and repayment charges.
These charges, when calculated together, become huge and can affect your repayment method. So you must check them thoroughly before you apply for a LAP.
● Look Out for Tax Benefits
You must know that, unlike other loans, there are no tax benefits on loans against property. In other words, you need to pay a tax amount along with the loan you are repaying. Despite the interest rates being considerably low, you need to pay tax.
A loan against property can immensely benefit you in the long run. You can avail of a LAP by keeping a personal or commercial property as collateral. But you need to have the loan against property documents convenient. With a LAP, you can easily manage an enormous financial crunch.