Factors That Affect Loan Against Property

Author : tanvibajpai1718
Publish Date : 2021-04-30 05:52:34
Factors That Affect Loan Against Property

When faced with big-ticket expenses such as higher education fees, hosting a wedding, or paying for a medical emergency, it may be a good option to leverage a self-owned asset to avail funding through a loan against property (LAP). The amount you received is based on the property valuation and you can avail a large sanction with attractive terms to meet your diverse funding needs. 

However, there are factors that can affect your property loan interest rate, sanction and terms offered. To ensure you get the best deal, take a look at these 5 important tips to remember when taking a loan against property. 

Check the lender-specific eligibility requirements 

Every lender has a specific set of parameters for their loan eligibility. To ensure that you get your loan sanctioned without delays, inquire about these beforehand. Some lenders may have unique city-wise requirements and failing to meet these will result in a rejection. For instance, applicants looking to avail a LAP in Delhi may need to maintain a higher monthly or annual income to qualify for the loan than another applicant applying in a state like Goa. 

Identify a suitable tenor

Factoring in the repayment tenor is imperative to borrow optimally. It aids financial planning and allows you to manage loan repayment efficiently, thus minimising the risk of default. Moreover, considering that a loan against a property has a lengthy tenor, sometimes ranging up to 20 years, you should know how to identify the best option. 

One good way to go about it is to use the EMI calculator. By entering the loan amount and property loan interest rate offered to you, you can find a tenor based on the applicable EMIs. Remember, a longer tenor increases the interest payable, whereas a shorter tenor increases the EMI amount. 

Inquire about the loan fees and charges

Prepayment is a crucial factor for the increased affordability of the loan. If there is a surplus, may be due to an employment bonus or sources of passive income, you can make a part-prepayment toward the outstanding principal. This effectively reduces your monthly payments or the loan tenor applicable. Many lenders do not charge any part-prepayment fees for the loan against property, ensuring affordable payments for the rest of the tenor and improving your borrowing experience.

Besides this, you should consider the other loan charges, such as the LAP processing fees, penal interest, bounce charges, statement fees, etc. Some of these charges incurred are a percentage of the total loan amount offered and this can result in a hefty sum. 

Know what affects the loan sanction

Your LAP amount depends on the current market value of your property. Your property valuation will depend on several factors such as age, condition, location, the type of property, and its size. The location also plays an important role, as a property in a prime location can get you approved for a high amount; the same holds for a property on the outskirts. It is important to get the most recent valuation before applying for the loan as it can affect the loan amount and the loan against property interest rate

Loan against property tax advantages

Tax exemptions depend on the end-use of the funds, and both salaried professionals, and self-employed individuals, are eligible to apply. You can claim tax advantages only on the interest paid, and not on the principal repaid for the loan against property. 

  • You can claim tax benefits on your LAP if the funds are utilised for business purposes. The benefits are on the interest paid, the processing and documentation charges only under the Income Tax Act, Section 37 (1).

  • Salaried individuals can claim benefits on the interest paid, only if the loan amount is used to finance the purchase of another property, under Section 24 (b) of the Income Tax Act. 

You cannot claim any tax advantages if the loan against property sanction is used to fund other expenses. These include your child’s higher education or travel expenses. Additionally, do note that the maximum tax deduction under Section 24 (b) is Rs.2 lakh and you can’t claim Section 80 (C) deductions.

Armed with this information, you now have a better understanding of the factors that affect your loan terms. As a result, you're in a better position to make the right choices and borrow optimally. With the Bajaj Housing Finance Limited Loan Against Property, you enjoy an attractive property loan interest rate with an adjustable repayment tenor, helping you plan your finances accordingly. Further, you can opt for a balance transfer and enjoy the benefit of swift loan processing to minimise delays. 

With favourable loan features and a competitive loan against property interest rate, this instrument is an ideal solution for your urgent and planned expenditures. To get started with the loan application, simply apply online by filling the easy form.

Category : business

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