Loan Against Property is a popular financial product where borrowers pledge their property as collateral to secure a Loan. Many lenders provide tools like a Loan Against Property eligibility calculator to determine eligibility. While these calculators can help estimate your eligibility, several misconceptions exist about how they work and what factors they consider.

1. The calculator provides an exact Loan amount

The most common misconception is that a Loan Against Property eligibility calculator provides the exact Loan amount a borrower will be sanctioned for. These calculators give an estimate based on your inputs, like income, property value, and current liabilities.

The final Loan amount is determined after a thorough evaluation by the lender, considering various additional factors such as the property’s legal status, market conditions, and the borrower’s repayment history.

2. Only property value determines eligibility

Another widespread myth is that property value is the only factor considered by a LAP eligibility calculator. While property value is crucial since it determines the Loan-to-Value ratio, other important factors include:

• Income: Lenders assess your monthly income to ensure you can repay the Loan.
• Credit scores: Your credit score is key in determining your eligibility and the interest rate you will be charged.

3. The eligibility calculator accounts for all properties

Many people assume that a Loan Against Property eligibility calculator will work for all properties, but this is not always the case. Lenders often have specific requirements regarding the property type eligible for a Loan. The calculator may not always factor in these nuances, which could lead to discrepancies between the estimate provided by the tool and the final eligibility assessment.

4. The calculator assumes a standard Loan tenure

Another misconception is that the LAP eligibility calculator assumes a fixed or standard Loan tenure. Loan tenure can vary depending on the borrower’s preferences and the lender’s policies. While longer tenures generally result in low monthly payments, they also cause higher overall interest payments.

Shorter tenures may be more beneficial regarding total interest paid but could strain your monthly cash flow. The eligibility calculator typically uses an average or estimated tenure, but this is not fixed.

5. You get the same result across different lenders

People often believe that using the Loan Against Property eligibility calculator from different lenders give similar eligibility results. However, different lenders may have different criteria for calculating eligibility. While some may be more flexible with the LTV ratio, others might prioritise a higher credit score or income. Each lender’s calculator uses specific algorithms and inputs, so the results can vary significantly.

Conclusion

While Loan Against Property eligibility calculators are convenient tools for estimating your eligibility, they should not be relied upon as the sole determinant of your Loan approval.  Always consult a financial advisor or the lender directly for a more accurate estimate of your eligibility and consider all the factors that play into Loan approval beyond the calculator’s output.