All Purpose Loan - Loan Against Property

Loan against property is an all purpose loan. A loan can be taken for any purpose in the time of financial emergency.  There is personal loan but it is tagged with a high interest rate along with short loan repayment tenure. Therefore many people are not able to take personal loan. If you own a house you can take loan against and it turns out to be cheaper than a personal loan. The reason behind this is the lender has the mortgaged property as security with it therefore there is no tension of defaulter of loan amount. While in the personal loan there are no such security norms.

The loan against property has a long repayment period, generally 10 years. The loan can be taken for any financial requirement whether it is for funding of the existing business in case of debt consolidation, any emergency, education, marriage or other constraints. In case of personal loan you have to specify the reason for taking loan but in this loan there is no such rule but if your loan amount is Rs 25.00 lacs and above then you have to specify the purpose of the loan.

For instance the country's largest public sector bank SBI has a clause that the loan can be taken for any purpose what so ever. In case the amount of loan is Rs 25.00 lacs and above then purpose of loan will have to be specified along with an undertaking that loan will not be used for any provisional purpose whatever including speculation on real estate and equity shares.

Some of the banks give the loan against both types of properties whether residential or commercial but some of them give loan against only the residential property. The loan amount can range from Rs 10 lakhs to Rs 3 crores, though the amount varies from lender to lender.

Some of the banks offer special schemes along with this loan like free personal accident insurance cover.

To get this loan you must be above 21 years of age and the maximum is 60 years, whether salaried of self-employed. For instance the largest public sector bank the State Bank of India has the following eligibility criteria - an individual who is: an employee or a professional, self-employed or an income tax assesse or engaged in agricultural and allied activities. Bank has fixed the maximum age limit to 60 years.

Though, some banks have fixed the maximum age limit for self-employed individuals to 65 years. The salaried applicants should be employed continuously for at least three years.

Documentation

Documents required for applying for loan are:

Proof of identity (passport, driving license etc).

Proof of residence address (passport, electricity bill etc), and proof of age (birth certificate, school leaving certificate, passport etc).

Salaried individuals must submit their latest acknowledged IT returns or bank statements for the last three months.

Self-employed individuals can submit computation of income for the last two years certified by a charted accountant.

In this loan there is a facility of an overdraft. Some banks offer this facility. The big advantage of taking this loan using the overdraft option is that the borrower has to pay the interest only on the money withdrawn, till the time loan is repaid.

While in the normal course the interest is paid on the entire amount throughout the tenure of the loan.

Before finalizing a bank check for the fees and penalties. Banks charge processing fees - is the amount charged by banks to cover the cost of processing your loan. The amount range varies from bank to bank. The fee amount is generally between 0.25 to 2%. The foreclosing of the loan before the actual tenure carries prepayment penalty.

Some banks charge this as a percentage of the outstanding principal of the loan amount. Therefore study all the features and terms and conditions carefully.

Article Source: http://blogs.rediff.com/loanagainstpropertyindia/2016/08/17/all-purpose-loan-loan-against-property/

Loan Against Property or LAP

A loan against property (LAP) is precisely what its name implies - a loan that is paid out against a property mortgage. The loan is offered in relation to a specific percentage of the market value of the property, which is approximately around 40-60%. In India, LAP is categorized under the 'Secured Loan' group where the borrower shows his property as the security, which can be a self-occupied ownership property or a rented out property (both residential and commercial). It's not necessary for the property to be a constructional structure. It can be a piece of land as well.

LAP usually comes with an interest rate of 12-15.75%.

In India, maximum tenure offered for a LAP is 15 years.

Starting the process

If you want to take a loan against property, the first thing you need to do is to shop around for a lender. Use the internet to learn about the eligibility criteria of a LAP and this is likely to vary from one bank to the other. In general, most banks would ask for the following -

Your income/savings details and also information of the debt obligations that you have

Cost of the property that you intend to mortgage

Your credit record

Repayment track record of loans taken prior to this

Steps involved-

Application: The loan application sets the ball rolling in a LAP. Select your lender and fill up the loan application form with necessary details.

Processing: After you apply, the bank starts processing your application, whereby the loan procedure starts moving. Your lender can also call you over for a discussion. Carry original documents with you when you go for it. Following this, the bank will conduct a field investigation of the matter and verify the documents presented by you. Documents required are usually income proof, age proof, address proof, identification proof, property papers, and employment details. When you submit your credit documents to the bank, you might have to shell out a processing fee as well, which is 1-2% of the desired loan value. The bank can also ask for an upfront fee for miscellaneous expenses.

Loan sanction: Once the bank has verified your financial credentials, it will work out a loan eligibility amount for you, which is put up in an offer letter along with terms and conditions and mailed across to you. You can accept the loan if it fits your bill by putting your signature on the acceptance copy.

Legal check and valuation: The bank will now conduct a legal check on the property that you intend to mortgage and evaluate it. Keep the property papers and No Objection Certificates (NOCs) ready for scrutiny.

Loan disbursal: If everything is in place and the bank is convinced of your loan repayment capacity, it disburses the loan through a Demand Draft (DD) or a cheque.

When you plan to take a LAP, consider your pay-off capacities very well, as, if you are unable to pay it back in full, you stand at the risk of losing your mortgaged property to the bank.

Article Source: http://blogs.rediff.com/loanagainstpropertyindia/2016/08/13/loan-against-property-or-lap/

Taking the Home Loan Path: 5 Common Mistakes

You may choose to take out a home loan when buying a property for a number of reasons. It could be because you do not have that kind of money and you can earn well enough to pay off your EMI, or it could be that you have the money but you want to use it to make more money and faster than the interest rates. Whatever the case may be, if you plan to take out a home loan, you are prone to a couple of pitfalls.

Once you are aware of these five common mistakes, you will have a better idea of how to go about taking the home loan path to buying your house.

Ignoring Your Cibil Score

Cibil is an agency that rates your creditworthiness, as in, they give you a score out of 900 to indicate how much should banks trust you in loan matters. Knowing this score can be a bargaining tool for you. If you have a good score, one that is above 700, it will give you more options to negotiate for better loan terms. You can ask Cibil directly to provide your Cibil score to you.

Applying for Other Loans as well

So you're looking for a home loan but are simultaneously applying for other loans as well, like personal loans and credit cards. It does look poor on you as you'll look 'Credit Hungry' and Cibil and the banks will usually blacklist you as a financial risk. When taking a Loan against Home, make sure you free up all other loans six months prior and just focus on the home loan.

Picking the Wrong Bank

It is easy to just go with the bank you are most familiar with, when the truth is that you could have found a better deal elsewhere. Do not shy away from looking for more options. Go to as many banks as you can and even ask your friends and family which bank they chose for their loans and why. There are more factors to consider than just offered interest rates, such how their services are, what their system of calculating fluctuating interest rates is, etc.

Ignoring Pre-Approval from the Bank

Do not ignore the pre-approval on your loan as banks offer it willingly and for free. Getting a pre-approval from your bank will cut down on the overall time, and makes the processing of your loan much easier when the time comes.

Getting Attracted to Big Loans

Bigger is not always better when it comes to home loans. Just because a bank offers a bigger loan doesn't mean you should take it. Sure, you could buy a bigger house, but you will also carry a bigger burden. When taking a home loan, your goal should be to nullify it as soon as possible. So get a lower home loan, pay a higher EMI for a shorter tenure.

[Source: http://ezinearticles.com/?Taking-the-Home-Loan-Path:-5-Common-Mistakes&id=8519786]

Be Sure on Choosing Your Home Loan Lender

Investment strategies in the real estate sector are becoming popular in the recent times. However these deals require hard work as there are lots of hassles that are involved while dealing with the real estate agents, lawyers and potential buyers. Above there is a need for huge amount of funds before finalizing on a real estate deal. Thus it is always better to a have good market survey prior to your property purchase.

Going on the fund side, there are many banks and housing finance companies that offer home loans which are easily availed. But to do a bit of market research is beneficial as it will keep you well informed about the changes that will you help in getting flexible loan terms and low interest rates. A good online research on home loan comparison would prove useful on deciding the best lender for you.

Today the market is floated with a number of home loans that are offered both at fixed and floating interest rates. Fixed rate home loans are availed with a view of fixed interest rate over the loan tenure. If one opts for this category of home loan then he need not worry about fluctuations in market interest rate.

Fixed rate Property Loan is not dependent on the rise in interest rates. On the other hand, there are floating rate loans where the interest charged varies with the market interest rate. These loans are also known as variable or adjustable rate home loans which generally start with both low interest rate and low EMI. But with a rise in interest rate, your monthly payment-EMI- also rises.

Buying a home is what everybody aspires today and arranging funds for the same is not a difficult task but to get the best deal may be tough. The competition today is rising with an increase in the number of banks and financial companies. These institutions are offering loans that are convenient in repayment through various options of monthly installments. All of them make every effort to provide the borrower with the best service.

These organizations are also offering additional facility now-a-days. Even if you do not have a good credit history, you can opt for home loans. So you need not fear about a loan being sanctioned due to your late payments, bankruptcy, discharge, etc. However these loans are offered at higher interest rate to customer with bad credit history.

So one just needs to sit in front of a computer with internet and compare the rates and services provided by the different lenders in the market. You can just compare the various quotes and find out which one cost you less.

This method is appropriate for people who dream to own a home. Online research facilitates you with various loan options and thereby helps in choosing the right option for you. So with high-speed internet access available with ease, searching for a home loan is no more a difficult task.

A proper comparison between the rates and schemes offered by differ lenders will definitely prove beneficial at a time of your property purchase.

[Source: http://ezinearticles.com/?Be-Sure-on-Choosing-Your-Home-Loan-Lender&id=1701160]

Homeowners Loan for Home Improvement

It is a common public perception that when you apply for a home loan or housing loan, you will need to build up a house or purchase a new property. However, lenders are now offering a homeowners loan that borrowers can avail of to improve the house that they live in.

Here are some of the frequently asked questions and answers when it comes to homeowner’s loan.

What is a Homeowners Loan?

A homeowner’s loan is made available to home owners who want to do maintenance work on their houses. Maintenance work include: repairs, landscaping, expansion of their property, installation of swimming pools and any other improvement that can be done on the property that will increase its value.

There are several types of homeowner’s loan which include: refinancing solutions, loan grants, personal loans or unsecured loans, first mortgage loans and second mortgage loans also known as home equity loans.

Refinancing solutions are usually the best option that homeowners can avail of. If you refinance your mortgage, you can lower your monthly amortization payments and possibly receive cash for home improvement purposes.

Unsecured loans or personal loans are given to individuals who do not want to put their properties as collateral against the loan they want to have released. Usually banks and other financial institutions will extend this kind of loan.

First Property Loan is usually given alongside home improvement loans. This type of loan is usually availed of during the term of the initial mortgage.

What are the requirements needed to apply for a Homeowners Loan?

If you apply for a home owners loan from banks and other lenders, be sure that you know the specifics of your house improvement. Details are needed such as the estimated cost and an improvement plan will also be handy.

Who are qualified to get the Homeowners Loan?

It usually depends on the lending agency but most of the time a good credit score is needed to get any loan and that includes the home owners loan.

For low-income families, the government usually grants special housing assistance for potential house repairs. These government agencies also help the low-income families with issues regarding home ownership and community development. Also, some non-government agencies give special assistance when it comes to repairing houses brought about by disasters.

For individuals who want to avail of a homeowner’s loan, they must keep in mind the amount of income they are earning. Debtors should always keep in mind their ability to pay in applying for any kind of loan. Do not make the mistake of entering into a loan and realizing halfway that you cannot meet the required payments that you agreed to.

Make sure that you understand every clause and agreement that you enter into while signing the loan agreement. It is a financial obligation that can have legal repercussions if you default your payments.

As a tip, scout several home owners’ loan providers and choose the one with the best package that you can manage and pay off depending on your present financial capability.

[Source: http://ezinearticles.com/?Homeowners-Loan-For-Home-Improvement&id=1448044]