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All About Loan Against Property and Checklist You Must Follow Before Opting

Loans have become an integral part of our lives. With financing becoming more accessible now, more people have start to borrow from banks to either fulfil their dreams or necessities. People often take loans to fund necessities, such as financing children’s education, marriage, or purchasing a car or house, etc. It is not uncommon for people to want themselves in urgent need of money and most transparent, reliable, and quickest way to arrange for money is to take a loan from financial institution. If you own a property, then there is a way you can fulfil your monetary needs. Simply go for a loan against property (LAP). A loan against property is a type of secured loan, wherein individual pledges his/her self-own residential or commercial property as collateral. 

LAP is a type of secured loan, which gives borrowers the option to avail of a higher loan amount than one can be eligible for in an unsecure personal loan. Mortgaging your property as a security in exchange for a certain loan amount reduces risk for banks and hence, banks can offer better terms & conditions on LAP than any other unsecure loan. The loan against property interest rate is lesser than that personal loan, alongside the flexibility of opting for longer tenor. Tenors in LAP can go up to 20 years whereas, in the case of personal loans, the maximum tenor that can be avail of is up to 5 years. This makes LAP a better option over unsecured personal loans. One can opt for different types of loans against property depending on one’s requirements.

  • LAP for personal use – Education, marriage, medical expenses, second house purchase, house renovation, etc.
  • For business use – Expansion of business or to recover from losses in business
  • LAP overdraft
  • For LAP balance transfer

Before choosing to opt for loan against property, it is always beneficial to check below points to make loan process easier.

  1. Loan Against Property Eligibility

The loan against property eligibility depends on various factors, such as an individual’s capability to pay monthly obligations, their monthly income, age, CIBIL score. Further, as loan product name implies, borrower must have a residential or commercial property in their name which can serve as collateral with bank. 

If you are planning to avail LAP in the future, always repay your EMIs on time and settle your credit card dues to improve or maintain your credit profile. Banks will gauge you based on your loan repayment history. Further, since the loan will be against the property value, you must show the necessary documents that prove your ownership of the property pledge. 

  1. Compare LAP interest rates

The interest rate on a loan against property varies from lender to lender. The LAP interest rate depends on an individual’s property value, age, and the tenor of the loan amount. It also varies depending on the location and an individual’s capability to repay. It is very important to compare the interest rates offer by various lenders as it is most important aspect of availing of the loan. Higher the interest rate, the higher the amount you’ll pay in EMIs and through the loan tenor.

  1. LAP Calculator 

Before opting for loan against property, one should evaluate their income and cash outflow to manage repayment of loan. Through the use of LAP calculator, one can know exactly amount of monthly EMI one has to pay on loan. LAP calculators help one play around with different combinations of loan amount, interest rate and tenor to arrive at the desire EMI figure.

  1. Documentation

While opting for LAP, it is necessary to have a checklist and arrange for the require documents in advance to avoid any last-minute rejection due to the absence of any document. Important documents that are required for the process include: 

  • Proof of photo identity- PAN Card, Aadhaar Card, Passport, Voter ID, or any other government authorised ID
  • Address proof- Electricity bill, Aadhar card, Voter ID, Passport, ration card, or any other government-approved address proof
  • Certificate of qualification for professionals
  • Salary slip, income tax returns
  • 3-6 month bank statement, depending on whether the applicant is salaried or self-employed
  • Balance sheet and P/L statements if you are a business owner
  • Ownership documents of the property the borrower plans to pledge

How to apply for loan against property? 

The process to apply online for a loan against property is quite easy. Here’s what you need to do. 

  • Fill up an online application form with your details.
  • Wait for the bank representative to get in touch with you for verification.
  • Submit the documents to the bank official who might choose to visit you for face to face verification.
  • Receive the loan offer letter from the bank after the successful validation of documents. 
  • The bank will then evaluate your property legally to ensure it is not under any dispute.
  •  Once the application is approved, receive the funds into your account within only a few days. 

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