What is Loan against Properties?
A loan against property is a loan disbursed by mortgaging an existing property. The property which is being mortgaged is valued as per market prices and a certain percentage of the same is provided as the loan. This is a secured loan where the property is taken as the guarantee. Of course, the income documents of the borrowing individual is taken into consideration for assessing the repayment capabilities. Best in class loan management software (Loan Against Property Software) used by leading banking institutions to offer loan against properties like mortgage, vehicle, machinery, etc. Our loan against property Software is a solution for residential property holders, By using our property loan software they will be able to manage all property dealings in an easy way.
The good thing is that loan against property can be taken for any purpose. Once the loan is taken, the financier has no say in the usage of the fund. The most common purposes are:
- Expanding business
- Marriage of children
- Higher studies of children
- Funding vacation
- Medical treatment
- House renovation, etc.
What is the process involved?
Below are the various things that one needs to know about loan against property.
For obtaining a loan against property, any kind of property can be mortgaged – occupied or unoccupied. It can be also for rent. At times, even a piece of land is eligible to be mortgaged for a loan against property.
While the eligibility criteria vary from one financier to another, the common factors taken into account are:
- Value of the property being mortgaged
- The income and savings of the borrower
- Repayment record of previous loans, credit cards, etc.
Interest rate and tenure:
The interest rate differs from one financier to another. For banks, the base rate is decided by RBI and they cannot lend below that rate. Usually, the interest rate of loan against property is a little bit higher than a home loan interest rate. Loan against property is usually provided for a maximum period of 15 years. However, each financier will have their own preferred tenure.
After submitting the required documents, the lending financing authority will perform a feasibility study from a technical and legal angle. They may ask for various documents in this process. The borrower has to oblige with the requests.
What are the challenges faced by Financial Institutions?
While the market share of the various financing companies in the loan against property market is increasing with each passing day, this product is not free from challenges. Some of the common problems faced by the operators are as follows:
Since the lending authorities have no say in the way the funds are used in a loan against property, some customers use it like a loan in perpetuity. The infrastructure market in most of India booming. Hence, people use one loan against a property to pay off another. This cycle goes on and on till the property prices crash. Once the property prices crash, the borrower has no option but to default.
In order to mitigate the risk factor involved and reduce the number of defaults, the financial institutions need a solid, reliable risk assessment module which gives them a clear view of the borrower’s profile and information about the property which is pledged for the loan.
High Volume of Data:
The process of offering a loan using a property as collateral involves a series of intricate processes and stringent legal compliance’s to adhere. Also, the process often tends to be quite tedious due to its primarily paper-based nature owing to the enormous property files and documents that ought to be submitted compulsorily in order to process a loan application.
The cumbersome task of managing the enormous amount of data and documents and manually annotating, verifying those documents increases the manual efforts and errors in the process which might in turn increase the time to information and over-all processing speed.
Stringent Underwriting Process:
The acrimonious rules and processes which need to be followed while offering a loan against properties and the frequent change or updates in regulatory compliance force financial institutions to keep up-to-date with the legal norms to ensure compliance-centric process.
These instances make the underwriting process more stringent and complex making the workflow pretty time-consuming as it may require a lot of manual intervention creating a negative impact on the productivity and loan application’s turn around time.
Why CloudBankINfor Loan Against Property Software?
CloudBankIN is a leading banking loan against property software used by major banks and financial institutions to streamline their loan life-cycle and manage their loan portfolio in an efficient way. The list of CloudBankIN features of loan against property software are listed below makes it the best banking suite for all lending institutions irrespective of their size:
- CloudBankIN enables a financial institution to manage their loan portfolio in a rule-based workflow environment which eliminates the presence of physical documents making the entire loan process paperless.
- CloudBankIN is seamlessly integrated with an array of credit assessment tools which gives every lender a comprehensive report of the borrower’s profile and a fine-grained analysis of the pledged property.
- The intelligent business rule engine which is coupled with CloudBankIN core enables lenders to feed and automate bank rules, and policies which would, in turn, ensure that the entire process seamlessly tied to compliance guidelines making it legally foolproof.
- Our integrated banking software enables quick turn-around-time of a loan application by improving the productivity and enhancing the overall operational efficiency.
- Institutions could monitor and control the performance of their core business process with our robust reporting engine which offers real-time reports about the performance of their loan products, segments, and borrowers.
Request a demo to streamline your lending process (Loan Against Property Software), optimise your operational efficiency and accelerate the revenue of your organisation with CloudBankIN.