Yes, your property needs to be insured for fire and other calamities during the tenor of your loan. You will have to provide proof of insurance to Bajaj Finserv every year or whenever required.
The process Loan Against Property disbursement is as follows:
• Submission of documents
You’ll have to submit a set of documents (see ‘Eligibility & Documents’ page for details) depending on your loan application documents you’ve handed in.
• Sanctioning of Loan
Your credit worthiness is calculated by Bajaj Finance, based on your income, age, employer or firm with whom you work, and CIBIL report. If you are self-employed then your nature of work, bank statements, and CIBIL report, and then plans out the maximum loan amount that Bajaj Finance can offer you. You are then issued a Loan Sanction Letter.
• Acceptance of Loan
If you agree with the terms and conditions of the loan, you will have to submit a signed duplicate copy of Loan Sanction Letter.
• Disbursement of Loan
The loan will be disbursed once all relevant papers of the property have been verified, all pertinent documents have been submitted, and the loan agreement has been executed.
Your EMI consists of two parts—paying back the principal amount you borrowed, plus the interest rates charged ‘on’ it. Three factors come into the equation—how much you borrowed, the rate of interest, and the loan tenure. There are ways to bring your EMI down: for one, it drops automatically if there is a decrease in interest rates, or if you pay back more than you need to (called a ‘partial prepayment’).
An amortization schedule is a table giving the reduction of your loan amount by monthly instalments. The amortization schedule gives the break-up of every EMI towards repayment of interest and the outstanding principal of your loan.
When interest rates go up, the interest component of an EMI also goes up. The EMI is kept constant but will result in a lower principal component. If the rates move up continuously, then there might be a situation where the interest Component becomes more than the EMI. In such a situation, principal component (EMI minus interest component) gives a negative figure. Consequently, the outstanding balance, instead of being reduced from the opening principal with the principal component, gets increased with the negative principal component. This is commonly referred to as negative amortization.
A loan where the amortization is negative does not get repaid, since the regular payments are insufficient to cover the interest component. The unpaid interest gets added to the principal and makes it grow. The situation gets reversed only when interest rates start falling. In this situation, the customer has to part-prepay the loan amount, increase the EMI of the loan, or do both.
In case of a loan with a floating interest, the interest component is subject to change. When the rates change, one of the following two changes can be done to a loan:
• The term of the Loan is extended (when rates go up) or contracted (when rates go down)
• The EMI amount is reset (increased in case rates go up & reduced in case rates come down)
As a practice, the term of the loan is extended since the customer might have given post-date cheques and it would be difficult to replace them on every rate change. However, in case of under construction properties, the Pre-EMI amount is increased by default.
You can choose any of the above options according to your convenience. The default option is to change the EMI to match the balance tenure of a loan.
The pricing increase happens only in the scenario of an increase in the Cost of Funds. Pro-active repricing policy is being put in place as a proactive measure to ensure that there is no inordinate increase in your loan pricing against new acquisitions and there is always parity for your loan.
As a goodwill gesture and to maintain transparency with our valued existing customers, Bajaj Finserv ensures, through our pro-active downward re-pricing strategy, that none of our existing customers are more than 100 bps over and above the last 3 months average sourcing rate. If a customer is higher than 100 bps from our last 3 months average sourcing rate, we carry out downward re-pricing of the rate of interest for all such customers to bring them to max 100 bps above the last 3 months average sourcing rate. This is a bi-annual exercise. This is yet another Industry first for any NBFC in the country.
Property Dossier is another industry-first, value-added service offered to mortgage customers of Bajaj Finserv. It is a customized report that guides the customer through all legal and technical aspects of owning a property in a simple and crisp manner. It also covers general property knowledge tips as well as all macro factors like property index of the city, important property tips, etc.
You can not avail a Loan Against Property for the following:
• Plot
• Property outside city/municipality limit
• Property with tenants for more than 5 years (with no renewed rent agreement)
• Property with structural flaws that requires substantial repairs
• Property constructed on agricultural land/farm land
• Illegal properties
• Property already mortgaged with other banks
• Residential property used for commercial purposes without approval from competent authority
• Under construction property except NRP transaction
• Industrial property
• Schools or hostels
• Hotel
