When you apply for a Loan Against Property, it is often a mystery what happens after that. How do the banks evaluate your application? What are the steps followed and how does each step affect your loan application? These are some of the common questions that come to mind once your application is logged in.
Let us take a step by step look at the process:
- Documentation: The necessary documents i.e. personal documents as well as property documents are collected from the applicant. Also, a completed application form with signatures in the required fields will be collected. Note: The signatures across all the documents as well as the application form must be an exact match; even the slightest mismatch can lead to your application being rejected.
- Login: After careful checking of the application, the data is formally submitted to the bank authorities for further processing.
- Personal Discussion: The applicant or applicants (in case there are co-applicants) will be called for a one on one discussion with the loan officer. In this discussion, the applicants can clear any doubts or questions they may have regarding the loan against property process.
- Credit Appraisal: Your credit history or more specifically your credit information report which includes records of your previous loans and credit cards will be verified by the credit officer at the bank where you have applied for your loan against property. Naturally, they would like to get to know your repayment track record based on which your application may or may not get cleared for further processing.
- Legal valuation: Once your application has cleared the credit appraisal, the next and perhaps the most vital stage is the legal valuation of the property you have pledged. See, every bank will have their own legal team of advocates and field experts who will not only cross verify all the necessary property documents, but will also visit the location to determine the age of the property, and that there are no legal violations such as construction beyond the specified area, unapproved plans or construction.These factors will help the team arrive at a particular value for the property, based on which your eligibility to borrow will be determined, since not more than 70% of the value of your property will be given as loan against property.
- Approval / rejection: On successful completion of your credit appraisal as well as legal valuation, the loan will either be approved or rejected. The final decision is at the sole discretion of the bank or financial institution where you have applied. As long as the documents as well as the on field verification ended positively, there should be no hassles in your loan getting approved. However, even if the slightest discrepancy is found during the verification process, your application is bound to be rejected without further ado.
- Agreement signing: After prior approval of your application, an agreement on your loan against property will be delivered to you. Make sure you read the agreement carefully and understand the gist of what is written in there. It is definitely important for you to know the contents of the agreement so as to know what you are signing up for.
- Disbursement: Once the loan is approved and the agreement is signed, a few post dated cheques are collected from the customer. This is done in order to ensure that the emi is paid in case the electronic clearing service (ECS) does not work for some reason. After this, the loan is disbursed as a onetime payment to the applicant.