Applying for a Loan Against Property is a significant financial decision. Nowadays, many prospective borrowers turn to online LAP eligibility calculators to get a quick estimate of how much they can borrow. However, as helpful as these calculators are, many users often make critical mistakes when using them, leading to inaccurate expectations. Let us talk about some of the most common errors to avoid when using LAP eligibility calculators:
Enter gross income
One of the most frequent errors made by users is inputting gross monthly income instead of net take-home income. Most eligibility calculators are designed to estimate your Loan eligibility based on your disposable income after accounting for taxes, deductions, and existing EMIs. Use your net monthly income, the amount that gets credited to your account each month, to ensure more accurate results.
Existing financial obligations
If you have ongoing EMIs from Personal Loans, Car Loans, or Credit Card payments, failing to disclose these liabilities in the calculator can inflate your eligibility estimate. Lenders evaluate your repayment capacity based on your debt-to-income ratio, which includes all current obligations. Always include your total monthly EMIs when calculating LAP eligibility to obtain realistic results that align with lender expectations.
Property value
Your LAP eligibility is significantly influenced by the market value of the property you're pledging as collateral. One common mistake is entering a subjective or inflated value instead of a professional valuation or current market price. This can mislead you into believing you're eligible for a much higher Loan amount than is feasible. Use an approximate fair market value based on recent sales in the area or professional assessments.
Incorrect Loan-to-value ratio
Some users incorrectly assume that the entire property value is eligible for borrowing. However, most lenders only approve Loans up to 90% of the property's value. This conservative approach helps reduce risk for the lender and ensures manageable EMIs for the borrower. When using an eligibility calculator, please note that the result is based on LTV guidelines.
Incorrect tenure
Your repayment tenure plays a crucial role in determining Loan eligibility. A longer tenure may reduce EMIs and increase the Loan amount you qualify for, while a shorter tenure may reduce your eligibility due to a higher EMI burden. Entering an unrealistic or incorrect tenure in the calculator can give skewed results. Use realistic tenures based on your age, income stability, and retirement plans.
Relying only on a calculator
While Loan Against Property eligibility calculators are handy, they are still indicative tools. Relying solely on these estimates without consulting a representative or reviewing the full eligibility criteria may lead to surprises during the documentation or disbursement stages. After checking your eligibility online, follow the next steps, such as submitting an enquiry or requesting a callback.
Conclusion
Using a Loan Against Property eligibility calculator is a smart first step when planning your property-backed Loan. However, to make the most of it, users must avoid common mistakes, such as inputting incorrect income, overestimating property value, or misunderstanding LTV ratios.
