13 important loan against property terminologies you must know

Even before you apply for a loan against property, you must understand the various terminologies, and fees & charges associated. It may help you manage your loan better.

Essential loan against property terminologies you must know

1. Loan against property (LAP): It is a type of secured loan where you pledge your residential or commercial property as collateral to borrow a significant amount. This loan allows you to unlock the value of your property and use it for various purposes like wedding, education, medical emergency amongst many other needs.
2. Loan-to-value (LTV) ratio: The loan-to-value ratio is the percentage of your property's current market value that the lender will give you. It determines the maximum amount you can borrow against your property. Lenders usually offer an LTV ratio of up to 70-80% for LAP, depending on the property type, location, and other factors.
3. EMI (Equated Monthly Instalment): EMI is a fixed monthly payment you must make to repay your loan. It includes both the principal amount and the interest charged on the loan. Bajaj Housing Finance Limited offers flexible repayment tenures, allowing you to choose an EMI amount that fits well within your budget.
4. Fixed interest rate: A fixed interest rate remains constant throughout the loan tenure. It ensures that your EMI remains unchanged over time. It provides predictability in loan repayments.
5. Floating interest rate: A floating interest rate fluctuates with market conditions. As a result, your EMI may vary over the loan tenure depending on fluctuating market conditions e.g., a recession. While it may offer benefits when repo rates are low, it also poses the risk of higher EMIs if rates rise.
6. Prepayment: Prepayment refers to making a prepayment towards your loan principal before the scheduled due date. It helps reduce the interest burden and can shorten the loan tenure. We allow part-prepayment on your loan against property without an additional fee or a penalty.
7. Foreclosure: Foreclosure lets you repay the entire outstanding loan amount before the scheduled tenure. While it helps you close the loan early, some lenders may charge a foreclosure fee. Bajaj Housing Finance Limited offers foreclosure without an additional charge or a penalty.

Terminologies related to fees and charges

1. Processing fees: Processing fee is the charges levied by the lender to cover the costs of loan processing, documentation, and verification. These fees are usually non-refundable. We provide a loan with nominal processing fees.
2. Legal and technical evaluation fees: Lenders might need a legal and technical evaluation of the property to know its market value and legal standing. The charges are usually borne by the borrower and necessary for the loan approval process.
3. Late payment charges: If you fail to pay your EMI on time, lenders usually impose late payment charges. You must make timely repayments to avoid penalties and maintain a good credit history.
4. Overdue interest: When you miss an EMI payment, you become liable for overdue interest. This additional interest is charged on the outstanding loan amount for the duration of the default period.
5. Documentation charges: This covers the expense of preparing and processing the necessary documents for your loan application.
6. CERSAI charges: CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) charges are related to the registration of your property as collateral. It helps create a transparent system of property collateral records and is mandated by law.

Understanding the various loan against property terminologies is crucial for a smooth borrowing experience. It is recommended to read the terms and conditions carefully, compare fees and charges, and choose a loan that aligns with your requirements and repayment capabilities.