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A loan against property is the most versatile form of credit you can get. From financing your children's education to weddings to home renovations, you can conveniently apply for LAP to fund hefty expenses.
But before finalizing a lender with the best LAP rate and submitting your application, there are a few charges that you must consider to make an informed decision. This includes foreclosure charges, LAP rate, processing fee for loan against property, and other LAP charges.
Let's understand them in detail.
LAP loan interest rates are usually higher than traditional loans. But with intense competition in the market, you can get it at competitive rates. Your loan against property interest rate will depend on your principal loan amount and loan tenure.
In India, the LAP loan interest rate ranges between 9% and 12%. Most lenders also allow you to choose between fixed and floating interest rates depending on your preference and expected growth in income.
When you apply for a LAP loan, lenders will charge a processing fee for evaluating and processing your application. The processing fee for loan against property usually ranges between 0.5% and 2% and is non-refundable even if the lender rejects your application.
So make sure you compare different lenders carefully and check their loan against property processing fees before making a decision.
The lender levies foreclosure charges on loan against property if you close the loan before the tenure ends. Depending on the lender, this charge can range between 2% and 4% of the outstanding loan amount.
According to the RBI circular, you don't need to pay foreclosure charges if you've opted for floating interest rates.
It is similar to foreclosure, but instead of pre-paying the entire loan amount, you only make a partial payment towards it. In such a situation, the lender will impose a fee on you called the part-payment charge. In India, it usually ranges between 1% and 2%.
Similar to foreclosure charges, you don't have to pay any part-payment charges if you've opted for floating interest rates.
If you fail to pay your EMI timely due to insufficient funds or other technical issues, the lender will levy an EMI bounce charge. These charges are typically a small percentage of the missed EMI payment amount and vary from lender to lender.
When you submit your loan against property application, the lender will run a check on the property to verify if it is free of legal disputes. This includes evaluating legal documentation and conducting an on-site evaluation of the property.
You will have to pay for the cost of this evaluation in the form of legal charges.
Many lenders allow you to extend your loan tenure, helping you reduce your monthly EMI burden. This is called loan rescheduling. However, you'll have to pay a loan rescheduling charge which varies from lender to lender.
When applying for LAP, you must go beyond just attractive loan against property interest rates. Charges like processing fees and legal charges can increase your overall loan burden even before the lender approves your application. So make sure to compare different lenders carefully for a smooth repayment experience.
You can also check out Tata Capital's loan against property to get the best interest rates in the industry and flexible repayment options. Visit our website to know more.
Policies, Codes & Other Documents