As the name indicates, a loan against property (LAP) is to avail of a specific amount by keeping your residential or commercial property as a mortgage with the bank or NBFC. The loan is provided at a certain percentage of the market value of your property. Usually, banks lend around 50% to 60% value of borrower’s property.
Since the property is kept as collateral with the financial institution, loan against property is considered to be a secured loan. In case the borrower fails to repay the loan amount, the lender has the right to sell the property through auction to recover their money.
Purpose of Loan against Property
The loan against property India can be used for the following purposes:
- medical emergency
- child’s education
- children’s wedding
- dream vacation
- business expansion
Benefits of Loan against Property
- Lower interest rate: One of the major loans against property features are its lower interest rate compared to a personal loan. This is because this loan is acquired by keeping your residential or commercial property as collateral. The general interest rates for LAP loan vary between 12% and 15% while the personal interest rates are between 15% and 25%.
- Low to no prepayment charges: The lenders don’t charge high prepayment charges for prepayment for a loan against property.
- Easy to acquire: Since it is a secured loan type, banks are more willing to offer this loan to the applicants. So, there won’t be much difficulty to get this loan.
- Longer tenure: The loan against property tenure is for a longer duration of up to 15 years compared to a personal loan that’s only up to 7 years.
- Lower EMI: Since loan against property is available for a longer tenure, it’s available for lower EMIs. So, it is highly suitable for people who cannot afford to pay the higher loan EMIs. Hence, there will be a lesser burden on the borrower.
Eligibility for Loan against Property
Generally, the loan against property eligibility for salaried individuals is fixed based on annual income, age and other lending criteria. Even businesses must have a specific turnover for availing their loan against property. Nowadays, many lenders mention their eligibility criteria on their official websites.
Documents required for Loan against Property
While checking your personal and credit eligibility, also keep a lookout for document eligibility. Following is the list of all the documents needed for a loan against property:
- Previous 2 to 3 years’ income tax returns or Form No. 16 from the employer
- Salary slips or Bank statement of the previous few months
- Identity Proof
- Address proof
- Property ownership documents, etc.
How to apply for a loan against property?
You can easily apply for a loan against property through an easy online process. Here is what you have to do. Fill up the online application form and submit the loan against property documents. Incorrectly filled forms or incomplete documentation can lead to rejection. The bank representative will contact you regarding the loan within 24 hours.