Why Loans Against Property Are Trending: A Financial Analysis for 2023


For many, the loan against property is the go-to financing solution for big-ticket undertakings. This makes sense as it is a secured loan, and offers the benefit of lower interest rates.

You can even get a substantial sum, going up to crores of rupees. However, this does depend on the value of the asset pledged. Thankfully, there are umpteen options available, and it isn’t hard to get a suitable deal.

In fact, the easy-to-meet eligibility criteria, quick loan approval, and affordable interest rates are why loans against property are trending. Read on to know more about this form of secured credit and its increasing popularity.

Financial Analysis of the Loan Against Property Market

The loan against property market is expected to grow at a CAGR exceeding 14%. This means the market is forecast to touch approximately $858 Billion by 2026. With lenders providing up to ₹15 Crores, opting for these loans is ideal for many types of borrowers.

Add to that the fact that pledging your property as collateral does not affect ownership or your ability to use it. As such, it works in the borrower’s favour, resulting in an upward trend of the loan against property.

You can use the borrowed funds for a wide variety of expenses. You can:

·   Pay education fees

·   Manage medical bills

·   Host a wedding

·   Start or expand a business

·   Pay for overseas travel

There are no restrictions on the sanction’s end use. Also, the interest rates offered by these secured loans are comparatively lower than unsecured loans. This leads to affordable EMIs and lower overall interest outgo.

As mentioned, you can opt for long repayment tenures and avail a sizeable amount sanctioned. In 2021, the demand for LAP soared by approximately 20%. Since then, the market growth for these loans has been steadily rising.

With technological advancements in finance, the appetite for these loans does exist. That said, the landscape faces several challenges that may hinder its growth in the future if left unresolved.

By identifying the crucial pain points and working towards improving them, lenders in the market can witness incredible growth in the coming years.

Essential Points to Consider When Opting for a Loan Against Property

While it is evident that the loan against property is gaining popularity, it helps to know all about the loan.

Here are some essential parameters to consider about the loan against property.

Loan Amount

This is one of the most important factors and depends on the value of the property you plan to mortgage. Before sanctioning your loan amount, lenders assess your property based on the market value.

A higher valuation translates to a high loan amount, but this can also lead to higher interest rates. Hence, you need to ascertain this factor before finalising your loan amount. You can use a loan against property EMI calculator to compare various options before choosing a suitable amount.

Interest Rates

Before applying for any credit, it is prudent to check its interest rates. Since this is a secured loan, you can enjoy lower interest rates. That said, the interest rates set by a lender depends on various factors:

·   Your age

·   Credit score

·   Loan amount you plan to borrow

·   Total income

Hence, scouting for various options offering competitive rates is ideal before selecting a particular lender.

Always consider your existing financial obligations before applying for these loans, as the interest rate affects the EMI you will end up paying for your loan. Use a loan against property calculator to zero in on the best deal.

Repayment Tenure

When you opt for this loan, you get to enjoy an extended tenure. Some lenders offer up to 25 years, while others provide 15 years to repay your loan. These flexible repayment options allow for affordability.

While a longer tenure decreases your monthly instalments, the overall borrowing costs rise as your interest outgo increases. Hence, assess this factor before you opt for a loan tenure. Avoid overly long tenures, especially if you can handle higher EMIs without straining your budget.

Eligibility Criteria and Documentation Requirements

Simple and easy-to-meet eligibility criteria are one of the prime reasons many are availing these loans. However, these terms vary from one lender to another, and you need to check the eligibility criteria set by a lender before opting for credit.

Here are some common eligibility terms set by most lenders:

·   You must be an Indian national

·   You must be between the age of 21 and 70 years

·   Your monthly income  must be at least ₹30,000

·   If you are self-employed, your business must have the required vintage and income, as specified by the lender

Once you meet the eligibility terms set by a lender, you can get loan approval after the lender verifies your documentation. Submit the following documents when opting for a LAP:

·   ID Proof: Aadhaar card / Voter ID / Passport / PAN card / Driver’s licence

·   Address Proof: Aadhaar card / Utility bills / Passport

·   Latest bank account statements

·   Latest salary slips, if you are salaried

·   Original documents of the property you plan to pledge

Advantages of Availing a Loan Against Property

Here are some of the perks you stand to enjoy when you opt for a loan against property:

·   Enjoy a high sanction amount of up to 70 – 80% of the market value of property

·   Use the loan amount to manage numerous financial needs, as these forms of credit have no end-use restrictions

·   Get the benefits of competitive interest rates as this is a secured form of credit

·   Opt for flexible repayment tenure and ease your EMI burden

·   Pledge residential or commercial properties as collateral to get the required funds

·   Enjoy quick approval and get funds disbursed digitally, directly to your account

·   Submit minimal documentation and meet simple eligibility terms to get hassle-free approval

To sum up, assessing the factors mentioned above is crucial before applying for a loan against property. Research and compare various options to get the lowest interest rates. This helps you minimise your overall borrowing costs. Once you find a lender, simply meet the eligibility criteria and get the best deal using a loan against property EMI calculator.

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