A secured loan that can be availed for any purpose without any restriction and end use of the sanctioned principal is a Loan against Property. It is similar to all other loans in many aspects but varies in some key features such as being a high-value loan, a long tenure, and collateral of physical assets like land, home, etc.
To avail a Loan against Property, the borrower needs to pledge their immovable property which can be either Residential, Commercial, or Industrial. The applicant must own the property and must not have pledged for other loans and be free of legal disputes.
Compared to Personal Loan, Loan against Property in Bangalore is different especially in a security aspect. The lender performs additional verification prior to loan approval. In today’s article, we’ll discuss how a Loan against Property is processed.
Here’s the complete process to get a Loan against Property
It is important for the borrower to understand the steps involved in processing a Loan application till the requested amount is sanctioned.
- Complete your LAP Application
The first step in the loan process is completing your loan application which is mostly about your personal details, income, dependants, collaterals, etc. Additional details such as Income Tax records in case self-employed are required. Beware that misrepresentation of information can lead to application rejection. Ensure the application is filled out without any errors.
- Confirmation of provided details
After receiving the LAP application, a lender representative will contact the applicant to verify the primary information provided in your application. This is a preliminary check to verify the genuinity of the applicant and helps arrive at an initial property valuation. After this process, the lender will initiate extensive verification such as the property ownership, Credit checks, any existing collaterals, etc.
- Submission of Necessary Documents
It’s the most important step in LAP application processing. The applicant must submit all the necessary documents for further processing such as KYC Documents, Proof of Income, Income Tax Returns, Property Documents, Bank Accounts, and any other documents as requested by the lender. Ensure that the collateral property is free of any legal disputes and submit the latest documents.
- Document Verification
The lender will start an extensive background verification based on the documents you have submitted. The background checks include employment status, Credit check, income details, the legality of Property Documents, and other personal information. There may be a need for a one-on-one meeting to evaluate your financial situation. Though there are no restrictions on the end usage of the loan, the meeting will help the lender understand the repayment capacity of the applicant.
Based on the authenticity of the Collateral property documents and market evaluation, the lender will arrive at a fair market price for the pledged property. By evaluating the property value and your eligibility criteria, the lender proposes an LTV (Loan to Value) ratio of the property you are willing to pledge.
Loan to Value is an often used ratio in Collateralized lending to determine the loan value that can be offered against the value of the pledged property. It is usually a percentage of the property value. For example, if the value of a property is 1Cr and the lender has an LTV of 75%, the maximum amount that can be borrowed by the applicant is 75 lakhs. Different lenders have different LTVs depending upon their internal policies.
- Loan Approval
The lender will get in touch with the applicant after satisfactory verification of Background checks. Further, the lender will contact the applicant to discuss the terms of the loan and the interest rates offered by them. If you find the terms and interest rates feasible to you, you can continue to accept the terms in the loan agreement. The lender will next approve your loan and issue internal directions for the release of funds.
Due to extensive background verification involved, the loan process may take upto 30 days.
Things to do before applying for a Property Loan
It’s a big decision to avail a Loan against Property. Putting your asset under collateral and reserving part of your monthly income for repayment. Before getting on board, here are some checks you can make.
- Assess the Property Value
The loan offered by the lender depends on the value of the property being Collateralized. And the lender won’t offer the full value as a loan but a percentage depending on their LTV ratio. Assessing your property before applying helps you plan your requirement.
- Check Eligibility Criteria
Every lender has different eligibility criteria. Before applying check for the eligibility criteria of different lenders to select an ideal suit for your loan.
- Plan your repayment
Uae our EMI Calculator to find out how much EMI you need to pay every month. Depending on repayment capacity, you can select your tenure accordingly.
- Do a Market Research
There are many lenders who offer Loan against Property in Bangalore. Carry out research on lenders, reviews by existing borrowers, processing charges, etc. Apply for one which fits right for your needs.
Being secured, Loan against Property comes at a lower interest than a Personal Loan. You can avail the loan without any usage restrictions. However, sometimes it becomes a tricky situation to select the lender to apply for. You can get in touch with Money Mango, a DSA for Home Loan and Loan against Property with reputed Banks and NBFCs in Bangalore.
Applying through Money Mango will give you an option to evaluate multiple lenders before applying and get the best loan option for your requirement.