There are many different types of loans available in the market, and one of them is the Loan Against Property, popularly referred to as LAP. As the name suggests, the loan is extended to individuals who own a property that they are willing to put up as collateral. The property can be either residential or commercial, and you generally get up to 70 per cent of the market value of the property as a loan amount.
The loan against property is a great option to acquire funds at lower interest rates, simultaneously making use of an idle asset that you own without needing to sell it off. However, the property you plan to mortgage must be free from any legal and financial complications.
Who Can Apply For A Loan Against Property?
There are eligibility criteria that you need to consider before applying for a loan includes your income and residence. For example, if you are a salaried income, you may have to submit salary slips and bank statements, while a business person submits income tax returns and other financials attested by a CA. Additionally, the general age limit for getting the loan is 21 years at the time of application. But, you should not be more than 60 years at the time of loan maturation.
Features and Benefits of Loan Against Property
The loan is a great option to acquire funds at lower interest rates, simultaneously making use of an idle asset that you own without needing to sell it. As long as you meet the eligibility criteria laid down by the lending institution and have all the documents required, it is easy to get the loan.
Let’s look at the various features and benefits:
- You can use the loan amount for any financial need, unlike a home or education loan, where the purpose is limited. Suppose you have to set up a business and need funds. If you opt for a business loan, you are required to show a business plan, past revenue, Income Tax Returns, and other financial documents. It would be best if you had a good CIBIL score and a property without any legal and financial complications.
- It is possible to get up to 70 per cent of the market value of the property approved as the loan amount. If the value of the property is high, the loan amount may have a cap – for example, some NBFCs have a cap of Rs. 12.5 crores.
- One reason why many people use this option instead of selling-off property is continuous ownership. The pride of owning a property has no price tag, and with a LAP, you remain the property owner. Just remember one thing, if the property is owned jointly, then all owners of the property are required to be co-applicants of the loan.
- Easy terms and conditions for getting the loan also add to its popularity. Did you know the interest rate is lower while the repayment tenure is longer? It means, unlike a personal loan, which is usually for 60 months, the LAP is available for up to 120 months. The longer the tenure, the smaller is the EMI payment that you are required to make every month. Tip: Always use the loan against property EMI calculator to know the exact EMI and judge your ability to repay the loan. If all your paperwork is in order, it usually takes less than a week to get the loan processed and approved.
It is crucial to have all the documents your lending institution requires and we have created a quick list for you:
- Address proof
- Identify proof
- Income proof
- Property ownership papers
- KYC documents
- Recent photographs
- Form 16
Note: Go to the lender’s website for the complete list, or get in touch with a customer care executive to help you with the details
Points to Remember
- It is essential to assess your cash flows and repayment capacity because if you default on your EMI, your credit score is affected, and penalty charges are levied. Before applying for the loan you have all the loan against property documents required for processing.
- A loan against property can be acquired from any lending institution from banks and NBFCs to private lenders. While banks are stringent and private lenders untrustworthy, reaching out to NBFCs becomes a good idea.