The Application Process for Loan Against Property: What You Need to Know

Introduction

When you have certain goals that require funding the best possible way to procure it would probably be by getting a Loan Against Property. LAP is a type of secured loan where you use your assets as collateral to secure funds. Whether you are looking to expand your business, fund your children’s education, purchase a property or handle a financial crisis, LAP offers high amounts of funding at competitive interest rates.

Before you dive in, it is important to understand how it works. Read on to learn everything you need to know about Loan Against Property.

Eligibility Criteria

Any person over the age of 18 residing in India is eligible to apply for a Loan Against Property. All you need is proof of regular income to make yourself eligible. A CIBIL score of over 700 is required to qualify for a LAP.

Documents Required

Along with the application form, the following documents are required:

•       - Proof of residence
•       - Proof of identity
•       - Certified/latest financial documents
•       - Copies of all property documents

Step by Step of Loan Application

1. Application- To begin the process you need to start out by filling an application form with all your details. These days most application forms can be filled online.
2. Verification of details- Once your application form is done and submitted, a representative will contact you to verify your details. Your credit score will also be checked.
3. Submit documents- All documents that verify your eligibility for the loan will have to be submitted. These include Identity proof, income proof, property papers, address proof etc.
4. Verification of documents- Once your documents are all submitted, your lender will verify them. Some lenders will require face to face verification while some would come directly to your house or workplace.
5. Property / Business Inspection- At this stage the lender does verification of Property offered as collateral and Business setup.
6. Sanction Letter- Once all your details and documents are verified, your lender will send a sanction letter for a loan against the property you are sanctioned.
7. Agreement- Once all of the above-mentioned steps are done, the lender offers an agreement that includes loan amount, interest rates, repayment schedules etc.
8. Disbursement- This is the final step. Once you sign the agreement, the loan amount is disbursed into your account either as lumpsum or in instalments.

Common Mistakes to Avoid

It is common to make mistakes while applying for a LAP. However, you must make sure that you do not make these common mistakes while applying for a Loan Against Property.

1. Failure to compare lenders- Before applying you must cross compare multiple lenders and what they offer. This will help you choose the right lender.
2. Neglecting CIBIL score- People tend to assume that CIBIL score doesn’t matter when it comes to secured loans like LAP. This is however very untrue. CIBIL scores matter here as well. Banks / Lender wouldn’t want to offer loans to someone with a low credit score.
3. Overlooking the fine print- Before signing the agreement you must make sure you read up everything. People tend to miss out on key details like foreclosure charges, penalties for delayed payments, additional fees etc.
4. Execessive Borrowing- People sometimes take up more debt than they can repay. This can lead to financial strains. You must assess your needs and your repayment capacity carefully before taking up loans.
5. Not Budgeting properly- If you don’t budget your finances properly, you might end up losing your asset due to inefficiencies in payment.

Conclusion

LAP is a powerful financial tool when used wisely. By understanding the application process and knowing everything possible about it is the key for a smooth experience. With the right approach LAP can open the door to various possibilities.