Owning a private business in Mumbai, Jai dreams of expanding his venture to other cities and needs substantial funds. He had heard about Loan Against Property but wasn’t sure how to avail it. On a Sunday morning, when Jai was thinking about it, a conversation with his friend, Veeru, a successful business owner himself, eased his worries!
Jai: Hey Veeru! What a pleasant surprise to see you here!
Veeru: Hi Jai! How are you? How are your expansion plans working?
Jai: Things are alright as such. However, I am a little worried about funds for setting up my new offices.
Veeru: Oh, is it? Have you thought of any way through which you want to arrange the funds?
Jai: Yes. I am planning to get a Loan Against Property. However, I am not sure how to go about the entire process.
Veeru: Hmm. I think I can help you here. You see Jai, there are certain aspects that you need to be mindful of before opting for Loan Against Property. First, let us begin with understanding what Loan Against Property is.
Loan Against Property is a mode of finance where the lender provides funds against the property. This loan can be against fully constructed, freehold residential and commercial properties for your personal or business needs. This loan can be availed by both, salaried and self-employed individuals. Understood?
Jai: Yes! But how do I know which lender to choose?
Veeru: This is the first step before you take any long-term financial decision, my friend. You see, there is no shortage of lenders in the market offering Loan Against Property. However, you need to base your research on several parameters:
Credibility or reputation of the lender
Maximum tenure offered
Rate of interests offered
Flexible repayment strategy
Other benefits such as EMI break (should you find it difficult to pay)
My advice is to research well on the lenders available in the market. There are aggregator portals that can assist you to compare offerings from multiple lenders. Alternatively, if you have a lender in mind, then I suggest visiting their official website or contacting their customer representative.
Jai: That’s useful! Could you tell me about the quantum of funds that I can expect?
Veeru: Well, it varies across lenders. Before deciding the amount, the lender will appraise your property. The amount will then depend on the prevailing market value. Generally, lenders sanction approximately 60% to 70% of the value of the property as a loan. So, if the value of your property is INR 1 crore, you can expect funds worth INR 60 to 70 lakhs.
Jai: Alright. What’s the eligibility for Loan Against Property?
Veeru: Eligibility for Loan Against Property is defined well by lenders on their website. After you zero-in on a lender, visit the official website to know the eligibility criteria. Generally, you need to have a good CIBIL score and a certain income threshold to apply for Loan Against Property. You can find all the information on your preferred lender’s website.
Jai: What rate of interest on Loan Against Property can I expect?
Veeru: The rate of interest on Loan Against Property is on the lower side as it’s a secured mode of finance. However, the rate of interest varies across lenders, and is also affected by several factors such as your profile, type of property to be mortgaged, and tenure of the loan etc.
Thus, while making a choice, competitive rate of interest should also be a point of consideration, as it directly impacts your EMI amount. In case you are unsure how the EMIs are calculated, online EMI calculators are available to help you with the calculation.
Jai: I see! Can you guide me on the documents I need to produce along with the loan application?
Veeru: You need the following documents:
KYC documents (proof of identity and address: Aadhaar number, passport, driving license, voter’s identity card)
Proof of Income
The documentation varies from lender to lender and thus, I advise that you visit the official website of the chosen lender to acquire a complete list. Alternatively, you can get in touch with the customer care representative to get an in-depth understanding.
Jai: Thank you for the information, Veeru. Do you know any credible lender offering Loan Against Property?
Veeru: Today, there are multiple lenders in the market that offer Loan Against Property. The choice of lender depends on your requirement. However, out of my personal experience, I recommend Loan Against Property from Godrej Housing Finance. They are fair, fast, and flexible, above all, their offering brings multiple benefits such as:
Low interest rates starting at 7.99% per annum
Longer tenure of up to 20 years
Offers up to 70% of the market value of your property
Loans for both, personal and commercial properties
EMI Break for the first 3 years of your loan
Jai: Oh, that’s great. I will immediately check out more about the offering online.
Veeru: While you research, you need to be mindful of the repayment strategy. Opt for a loan that you can repay easily. Flexibility in repayment is essential. Also, do read the terms and conditions carefully before signing the loan documents.
Most people make the mistake of choosing a loan solely based on the interest rate. Don’t commit that mistake. Take into consideration the lender’s credibility and the flexibility on offer. As a Loan Against Property is a long-term commitment, these small things matter significantly.
Jai: That was quite a session, Veeru! I believe a hot cup of tea is a great way of saying thanks!
The names used in this article are fictitious and are used for representational purposes only.
The above information is for illustrative purpose only. For more details, please refer to the product or service document and/or connect with our customer representative prior to making any financial decision.