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Some Essential Points Relating to Loan Against Property

A property owner needing a large amount to meet their financial goals or obligations can apply for a loan against property (LAP), favouring them in many ways. LAPs offer large sums, up to Rs.5 crores, with longer repayments tenures, thus driving the market. 

LAPs can be taken to fund education, wedding, business expansion, medical emergencies, or other personal or business needs with a large amount of money. Though many financiers are available in the market, individuals prefer non-banking financial companies (NBFCs) to get credit with a hassle-free experience and at competitive interest rates. 

Some Essential Points Relating to LAP

Individuals should know the following essential aspects concerning LAPs:

Interest Rates: Since a property loan is secured, anyone can get it at lower interest rates comparatively. Since the lender is providing the credit against an immovable asset, it can have a sense of security against default risk. It makes lenders offer competitive interest rates. To offer the best loan against property interest rate, lenders consider the applicant’s nature of work, income, credit history, type of property, and the current market value of the property.

Type of Property to be Pledged: Individuals can apply for a LAP against a commercial as well as a residential property. It can be a building or plot. The interest rate varies for different types of properties.

Disbursed Amount: The disbursed amount can go up to 60- 70% of the property value. The loan amount will depend on the property’s type, condition and location. 

Property Ownership: The borrower of LAP loans will enjoy the property ownership in their name and use it as before, even after availing the property loan.

Collective Application: The property title must be in the borrower’s name. If there are two or more property owners, each owner will be a co-applicant for the loan. Also, the property must not be disputed.

Age Limit: The age limit differs for salaried persons and self-employed persons for a LAP loan. The age limit for salaried persons is 21-60 years and 25-65 years for the self-employed.

Credit Score Impacts Loan Sanction: Lenders review your financial profile before sanctioning the LAP loan. They assess customers’ credit history and credit scores. The loan sanction will be easy for individuals with a good financial track record and credit score of 700+. The lender can grant a LAP at favourable terms by accessing the borrower’s repayment capacity. 

Documentation: Lenders carefully verify all property-related documents. Common documents asked by lenders to support a LAP loan application are as follows: 

  • Any of these documents for ID Proof – PAN, Passport, Voter ID, or Driving Licence
  • Any of these residence proofs – Ration card, Bank Statement, Driving Licence, Passport, Electricity or Telephone Bill, or Rental agreement
  • Any of these for age proof – A certificate from the Government authority, PAN, or Passport 
  • Past two years’ Income Tax Returns (ITR)
  • Past two years’ Audited financial statements (for SMEs)
  • Past six months’ Bank Statements 
  • Salary slips for salaried employees
  • Property documents – Title Deeds

Reduce Debt Burden with Loan Balance Transfer: Borrowers with an existing LAP can use a loan balance transfer facility to reduce the debt burden against a lower interest rate. Many lenders allow borrowers to transfer the outstanding amount of their existing LAP loan.

Repayment Tenure: LAPs are offered with a long-term repayment tenure for easy repayments. The repayment tenure can be as long as 15 years. For such long-term debts, borrowers should make informed decisions using a LAP loan EMI calculator. Estimate the EMIs (Equated Monthly Instalments) for different loan tenures and choose a tenure as per your repayment capacity considering cash flow. 

The Closing

The best loan against property can help property owners in many ways whenever they are under financial stress. Anyone looking for a high-value loan with the freedom of using credit can prefer LAP loans. 

Also Read: Pros and Cons of Unsecured Business Loans for Small Businesses