Through LAP. you are able to increase the value of the asset you already own by taking out a loan against it and using it as collateral to borrow the necessary funds. It also means that you won’t have to worry about giving up your right to the property in exchange for the required money, unless you fail to keep up with your loan payments.
Because of this, a SBI Loan Against Property is a more acceptable lending choice for property owners to satisfy their large-ticket monetary requirements than selling the property for the purpose of receiving the funds, which means that property owners can avoid having to sell their property.
Before deciding to take out a ICICI Loan Against Property, it is essential, however, to take into consideration the following factors:
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The rate of interest is amongst most crucial factors
The interest rates for loans secured by real estate can vary from one lender to the next, but they are typically in the range of 7 percent to 13 percent annually. When compared to the interest rates that are charged for non-self-occupied or commercial property that is pledged as collateral, the interest rates on SBI Loan Against Property that are offered for residential property that is occupied by the owner and is being used as collateral tend to be lower. The size of the loan as well as the repayment period chosen by the borrower can both have an effect on the interest rate.
Repaying tenure
The majority of lenders like ICICI Loan Against Property provide repayment tenures for loan against property that stretch up to 15 to 20 years. This is significantly longer than the repayment tenures offered for other loan alternatives such as gold loans, personal loans, and top-up house loans. The repayment term for a gold loan typically extends for up to three years, the term for a top-up home loan typically extends for the same amount of time as the remaining term on an existing home loan, which can be up to fifteen years, and the term length for personal loans is typically between one and five years for the majority of lenders.
When you are deciding how long your loan will be repaid, you should keep in mind that a shorter repayment term will result in a larger EMI payout for SBI Loan Against Property, while selecting a longer repayment term will result in a lower EMI payout. However, because a longer loan term also results in a greater overall interest payout, you should make every effort to prepay your loan whenever you have spare funds in order to reduce the overall interest outlay.
LTV ratio plays a key role in loan amount decision
The size of the SBI Loan Against Property is often between 50 and 70 percent of the property’s current market value, depending on the lender. The amount of the loan is determined, in large part, by the value of the property that is being mortgaged. After this step, the amount is determined by taking into account the customer’s ability to make repayments, their income, and other factors. Bear in mind that while determining the fair market value of the property, lenders take into account a variety of elements, including the location and age of the property, as well as infrastructure and geographical stability, among other things. On this basis the loan amount is decided before sanctioning the ICICI Loan Against Property.
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No restrictions on how the loan money can be used in the end
ICICI Loan Against Property is structured similarly to a personal loan, a top-up home loan, or a gold loan in that there are no restrictions on how the money can be used in the end, with the exception of unlawful or speculative purposes. The money are versatile and can be put to a variety of uses, like paying for a child’s higher education, expanding a business, travelling abroad, etc.
Processing time is on the longer side
Because lenders are required to verify all of the documents related to your property before disbursing the ICICI Loan Against Property and conduct a technical study to confirm the ownership of your property and its market value, the process of disbursing a loan against property typically takes between one and three weeks.
In addition to accepting residential and commercial property as collateral, certain lenders also tend to allow other forms of property, such as industrial property, to be pledged in order to obtain a loan against property. The type of property that can be mortgaged is determined by the lender.
Fees are not to be overlooked
Processing fees of SBI Loan Against Property typically range from 1% to 2% of the total loan amount. Because LAP typically involves large ticket amounts, it is vital to compare and factor in the processing charges before zeroing in on any particular lender. This fee can make a significant difference to the overall cost of the loan for the borrower, so it is important to compare and factor it in before making a decision.
Borrowers should also keep in mind that lenders may also levy prepayment penalty for loans involving fixed interest rates. However, in the case of loans involving floating interest rates, lenders are not allowed to levy prepayment penalty for loans disbursed to individual borrowers, as per RBI guidelines. Borrowers should also keep in mind that lenders may also levy prepayment penalty for loans involving fixed interest rates. Therefore, before you prepay your loan secured by property, you should ensure that the total savings in interest expense will greatly outweigh the prepayment charges, if there are any.
Be prudent when comparing with other credit options
While looking into other loan options such as a gold loan, personal loan, or top up home loan to fund your relatively large monetary requirements, the decision should not be limited to the interest cost involved when comparing it to a loan against property. This is because the loan against property offers a lower interest rate overall. It is also crucial to consider the loan tenure that is being offered, the eligibility of the borrower for the loan, and the availability of suitable collateral with the borrower, if the latter is required. Choose the kind of loan that will cost them the least amount of money in terms of the interest cost and will yet enable them to fulfil the loan obligation in a comfortable manner without affecting their liquidity.