Thinking of taking a loan against property? Here are 5 thumb rules to follow.

Taking out a loan against property is no walk in the park. It is in all respects, a serious matter and hence there are some ground rules you need to follow to ensure a smooth journey with a loan against property. So before you pick up a pen and sign the application form, verse yourself with these thumb rules.
Borrow within your financial capabilities.
Before you commit to a loan against property, it’s worth it to calculate your financial standings and repayment capacity with regard to the amount you borrow. Remember the loan amount you receive will be in the range of 70% to 90% of the value of your property with an interest rate varying from 9.65% to 16%. Also take into consideration that it is a rough thumb rule to ensure that your monthly expenditure towards all your loans combined is not more than 50% of your taxable income. Keeping these factors in mind, if you think the loan against property is still a viable option, then and only then, you should go ahead with your application.

Short tenures work better in the long run.                                                                           The maximum tenure for a mortgage loan is 15 years and though it may seem very alluring to pay a smaller EMI over a long tenure, bear in mind that long tenures invite higher interest rates. So, if you do choose to take a long tenure, you will inevitably end up paying more on the long run. Therefore it makes sense to take out a loan with shorter tenures. And if your financial standings cannot support a larger EMI now, you can always approach your lender ask them to increase your EMI as and when you financial abilities better year upon year.


Insure yourself.
Mortgage loan generally mean large loan amounts and so taking out an insurance cover along with your loan makes sense in the rare occurrence of any dire circumstance. In which case all your family members, or who so ever you wish to insure, remain protected, come what may. This thumb rule is just so you leave nothing to chance.

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Read all offered documents carefully.
All the terms and conditions for the loan have to be mentioned in the documents offered to you before you take out the loan. It’s advisable to sit down with someone who’s well versed with the topic and understand each and every point. Just signing it without studying it could lead to you getting blindsided in regard to any hidden costs or additional charges such as processing fees, pre-closure charges and sales tax. So read, understand and study the fine print before you put your signature on anything.


Shop till your interest rates & processing fees drop.
Last but not least, it’s imperative that you weigh all your options, consider every possible choice and look at every single alternative before picking a loan against property. By this we mean, go to many financial institutes, understand their offerings, see which one gives you a better interest rate, or loan amount or lesser administration and processing fee and only pick an option that completely suits your needs.

A loan against property is the best way to raise funds for your needs and is always a smart and secured borrowing option. But be sure to follow these rules and you will see that your experience with such a loan will be a much smoother and convenient one.

Importance of a good credit score for a Home Loan

A home loan, today, is a function of more than one factor. In addition to your income and ability to replay, your credit score is another very important factor that determines your eligibility for a home loan and also the interest rate at which the loan would be sanctioned.

There are four credit bureaus in India that prepare credit reports and tag you to a credit score. They are: Experian, Equifax, CIBIL and Crif High Mark. The credit score basically sums up your
behavior as a borrower basis all the positives and negatives in your credit report.

These credit bureaus collate only credit information i.e. information on loans such as home loans, automobile loans and personal loans and information on credit facilities such as overdraft facility and credit cards. Their reports do not take into account other information pertaining to customers’ savings accounts, fixed deposit accounts or other such investments which constitute the liability portfolios of banks or financial institutions.

Here we will talk about one of the most popular scores, the CIBIL Trans Union score. CIBIL Trans Union Score ranges from -1 (or NH) to 0 (or NA) and 300 to 900.  The closer the score is to 900, the better it is.

An applicant gets a score of NH or -1 when he does not have a credit track record at all and a score of NA or 0 when his credit track record is less than 6 months.
As per CIBIL, a credit score of NA or NH is not a matter of concern. This may mean:

  • One does not have a credit history at all or enough of a credit history to be scored, i.e. the applicant is new to the credit system.
  • One does not have any credit activity in the last couple of years.
  • One has just add-on credit card(s) and no direct credit exposure in his/her own name.

There are also a few common mistakes that can adversely affect your score:

  • Default in EMI payment
  • More unsecured credit in the form of credit card or personal loans, than secured credit like home loan, Loan on Property  or car loan
  • High utilization of credit card limit
  • Rising outstanding credit amount
  • Applying for multiple loans at once

Maintaining a good credit score will help you secure any loan with quite an ease, that too at a lower rate of interest and maybe with a waiver of processing charges too. Get your CIBIL score checked today and make amends if necessary. It’s never too late for good practices!



How to avail Home Loan without CIBIL Score?

Home Loan without CIBIL score is un-imaginable. I receive multiple queries from my clients on How to avail Home Loan without CIBIL Score. In short, Home Loan lender should not check CIBIL Score of a Borrower. I have handled many cases wherein the people are victim of mistaken identity, wrong entries, identity theft, CIBIL Score of -1 i.e. insufficient credit history or no credit history. Dream of owning a house will remain dream for this section. As we know that now it is very difficult to avail Home Loan without CIBIL Score. I am writing this post for the benefit of such potential borrowers who are being victimized or don’t have sufficient credit history. Any borrower who has defaulted on payment i.e. willful default or in case of intentional default, my honest suggestion is to improve CIBIL score before availing Home Loan. Home Loan without CIBIL score should be the last option for any potential borrower as it comes with additional cost. It is always advisable to Improve your CIBIL Score by following good credit practices. Even if you are being victimized, you should try to get your CIBIL score corrected despite the fact it’s a long process.

Home Loan from Co-operative Banks

Not many people are aware that most of the co-operative banks approve Home Loan without CIBIL score. Reason being, co-operative banks are very small in size therefore cost of operation is high and cost of funds is also very high. There is a constant pressure on these banks to re-deploy funds. You might have observed that co-operative banks offer high rate of interest on Fixed deposits. If cost of funds is high then obviously bank will lend this amount at higher rate. Any borrower with good cibil score will not approach co-operative banks for Home Loan. As this borrower will not pay high rate of interest. Only those borrowers who wish to avail Home Loan without CIBIL score approach co-operative banks.

The interest rate on Home Loan from co-operative banks is in the range of 13% to 16% i.e. 3% to 6% higher compared to ROI offered by nationalized and private banks. The home loan ticket size will be low. Some co-operative banks offer max Home Loan of upto 50 lakh to 70 lakh only because of high risk of default. A co-borrower or guarantor is must for Home Loan from co-operative bank. Last but not the least; you should know the Manager, employee of co-operative bank or any good customer of the bank to avail Home Loan. In most of the cases Home Loans are approved only on the basis of references. Good thing about Property Loan

from co-operative bank is that you can avail Home Loan without CIBIL score.

Home Loan from Friends and Family Members

Another good option to avail Home Loan without CIBIL score. Again people are aware that you can also avail Home Loan from your friends and family members. Obviously they will not check your CIBIL Score to approve Home Loan. Few important points

  1. Sign agreement similar to Home Loan agreement with the parent/relative/friend from whom you are availing Home Loan.
  2. Mention the Home Loan Amount, Rate of Interest and repayment Terms & Conditions. It is not necessary that you have to pay market linked rate of interest and monthly EMI’s. You can sign agreement at even 1% Home Loan Interest Rate and pay lump-sum amount at regular intervals with interest.
  3. Mention EMI amount & frequency similar to Home Loan EMI

Other terms and conditions like who will retain the original documents, lien on property etc can be discussed and mutually agreed upon.

Loan against Existing Assets

Home Loan without CIBIL score can also arranged by availing loan against existing assets. There is a famous saying that “A friend in need is friend indeed” similarly in financial world “An Asset in need is Asset indeed”. I do agree that you can’t arrange large pool of funds through this route but you can explore. Moreover many people are not aware that they can avail loan against certain existing assets. In short unlock value of existing assets which will help to arrange Home Loan without CIBIL score.




Loan Against Property – The Process.

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:

  1. 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.
  2. Login: After careful checking of the application, the data is formally submitted to the bank authorities for further processing.
  3. 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.
  4. 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 against property(2)
  5. 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.
  1. 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.
  2. 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.
  3. 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.



Loan against Property: an overview.

Loan against property is one of the best examples of capitalizing the financial value of a property. In this module of loan, a borrower takes loan from a bank or a financial institution. This module of loan clearly displays how property value can help you in getting loan sanctioned. In this loan module, a property is kept as collateral security and the borrower can use the loan amount for his personal requirement, it can be for higher education, for developing/funding business, or for other legitimate purposes.


The property kept as collateral security can be a residential property as well as it can be commercial property. Generally, at the time of loan disbursement, 50-60% of the property value is considered as the loan amount. The property is kept mortgaged to bank and it is considered as a secured loan as the property mortgaged works as the guarantee for the borrower.


Eligibility Criteria for Loan against Property

Eligibility criteria for availing loan against property may vary from one institution to other, but in general there is a similarity: the eligibility mostly depends on the income profile of the borrower. The basic eligibility is validated for the genres of applicants:


  • Salaried individuals: The applicant should be a permanent employee with the government or a well established company. Minimum age of the borrower is 25 years.
  • Professionals: The applicant has to be a professional for example, doctor, engineer, architect, chartered accountant, etc may apply in these category. Maximum age of the applicant is 65 years.
  • Self employed: The applicant should be a regular tax payer by fling income tax returns. The individual must have been in the same business for a minimum number of at least 3-5 years.

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Besides income eligibility the property to be mortgaged needs to be free of all sort of legal litigation and the property should be in the name of the applicant.


Documents needed for the loan against property processing:

  • Legitimate proof of residence can be current utility bill or ration card.
  • Salaried individuals need to produce their salary slips for last 6 months.
  • Self-employed individuals should present a certified financial statement for the last 3 years.
  • A copy of the latest bank statement for last 3-6 months.
  • Duly filled loan application form with the latest passport sized photograph.
  • Self-employed individuals need to present proof of existence of their business and related business profile.
  • Self-employed individuals are expected to supply details related to their educational qualifications.
  • Copy of income tax returns for last 3 years should be presented.
  • Processing fee check.
  • All property related documents, including the approved building plan of the property should be attached with the loan application.
  • Copy of details of all existing loans.


Interest Rates for Loan against Property

An individual who needs a loan against property may decide between two options of interest rates. These interest rates may vary according to the duration of the loan.


  • Fixed Interest Rate: This interest rate stays fixed throughout the loan duration. It varies from bank to bank but the general rate lies in the 11 – 15% per annum range.
  • Adjustable Rate: This interest rate is not fixed and static; it varies at par current market setting. This module of interest rate could be beneficial for those who wish to avail the loan for a short duration.


Loan against Property EMI Calculator

The EMI for Loan against Property can be calculated using the easy formula mentioned here.


EMI = [P x R (1+R) N]/ [(1+R) N-1]



  • P is the loan sum in use
  • R is the valid rate of interest
  • N is the tenure (number of months) of the loan applied.


Loan against property is a great facility where short term loan is needed against property. However, before mortgaging a property, its pros and cons should be properly judged.