Loan Against Property

         As the name suggests loan against property (LAP), is the loan that you avail by keeping your property as mortgage with the bank. The loan is given as a certain percentage of the market value of the property. Once you lend your property as a mortgage, the bank or the NBFC will provide you 60-70% of the current market value of that property as loan. As your property is kept as collateral with the bank, it is a secured loan. In case you fail to repay the loan, the lender has the right to auction your property and recover the money. As your property is kept as collateral with the bank, it is a secured loan. In case you fail to repay the loan, the lender has the right to auction your property and recover the money. But putting your property as collateral doesn’t mean that you are not allowed to use it however, you will have to be good on your promise of repayment after a certain period of time. Loan against property is considered to be one of the most favoured forms of loan in India. It is favourable in this nation for the following reasons: 

  • It can be applied for child’s marriage. 
  • For expanding a business
  • For funding medical treatments
  • For funding higher studies. 
  • For vacation purposes. 

The loan against property can be avail on following type of property:

  • Self-owned residential property
  • Self-owned and self-occupied residential property
  • Self-owned but rented residential property
  • Self-owned piece of land
  • Self-owned commercial property
  • Self-owned but rented commercial property

LAP is considered the most favoured form of personal loans for the following reasons:

 

The interest rate is surprisingly low: The main part of the loan against property is collateral. Now collateral is a form of assurance to the bank that loan will be repaid after the given tenure. Loan against property interest rates generally

ranges between 12% and 15% while in case of personal loan the interest rate ranges is 15% to 25% Lower to no prepayment charges:  You can close your loan against property by making prepayments towards your loan. Lenders generally don’t charge

prepayment charges in case of loan against property. While it is not true for all the banks, you can expect the prepayment charges to be lower. 

 

Easy to get:  As these are secured loans, banks are more than willing to provide these loans. Therefore, you won’t find it very difficult to get the property loan. 

Longer tenure: Personal loans tend to have a smaller payback period. However these loans are generally available for longer tenure going up to 15 years while the tenure in case of personal loan is generally up to 7 years.

Lower EMI: There is an inverse relationship between tenure and EMI. Longer the tenure lower will be the EMI and vice versa. As these are available for longer tenure, these become suitable for people who can’t afford paying higher EMIs. However, it is always advisable that a person should take loan for the shortest tenure as the interest burden will be lower in case of short tenure loan.

 

Loan against Property Eligibility Criteria:

 

          The eligibility criteria of getting access to Loan against Property are the following: 

  • Firstly, the property you are planning to put forward as collateral should have no outstanding disputes associated with it.
  • You should be of Indian nationality. 
  • You should at least 21 years of age to fill the loan application. (this age
  • factor may vary from bank to bank)
  • If you are a salaried employee, you have to have the salary of 25000 per month to get access to LAP. 
  • If you are a self employed individual, your annual income should be INR 5,00,000. 
  • The lender will be getting a background check on you. Therefore, make sure that your credit score for the loan is good with other banking institutions. 

 

          The above are the eligibility criteria. However, if you want to score a good EMI rate, there is a pro tip for you, make sure that you are good on your credit for that loan.

 

Required Documents for Loan against Property:

If you are a salary man

 

  • You need an Identity proof which can be an Aadhar card, Voter ID card, Driver License etc. 
  • You will need the salary slip for the past 3 months. 
  • A form-16 issues by your employer(current)
  • Bank statement for the last 6 months. 
  • A cheque that covers the cost of administration and processing to the bank that is going to process your loan. 
  • If you are a businessman(self-employed)
  • You need an Identity proof which can be an Aadhar card, Voter ID card, Driver License etc. 
  • Credentials related to your education. This entails certificates, degrees, diplomas etc. 
  • Income tax returns for the past three years.
  • Bank statement for the last 6 months. 

If you are a self-employed professional:

  • You need an Identity proof which can be an Aadhar card, Voter ID card, Driver License etc. 
  • Credentials related to your education. This entails certificates, degrees, diplomas etc. 
  • Registration and licensing certificates related to your profession. 
  • Existent of your business profile. 
  • Balance sheets of the past 3 years including the profit and loss statement of the company. 
  • Bank statement for the last 6 months. 
  • IT statements (acknowledged) of the past three years.

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