What is Loan Against Property?
A loan against property, as the name suggests, is a loan that individuals can avail of by pledging property as security for the loan’s approval. The property the applicant decides to pledge as security can either be a piece of land, a constructed house, or even a commercial space.
The asset pledged as security with the lending organisation remains as collateral until the loan’s principal amount, as well as the interest, is repaid by the consumer.
Deciding to acquire a loan against property can be highly beneficial for applicants. It is one of the easiest methods of acquiring funds in times of need.
Getting a loan against property offers individuals an outlet to acquire a loan of a higher amount for an extended period. This feature of a loan against property provides convenience to borrowers and facilitates them to repay the loan amount without hassle.
Features and Benefits of Loan Against Property
Here are some of the most prominent features of acquiring a loan against property:
The loan amount of a loan against property varies from lender to lender. The general sanctioned loan amount for a loan against property is around 60% of the pledged property’s market value. Moreover, the loan amount ranges between 10 lakhs and 7.5 crores.
The rate of interest depends on the tenure of the loan against property. For instance, when it comes to longer repayment tenures, the interest offered is very competitive.
Different lenders have different policies regarding the repayment of the borrowed amount. Some lenders offer borrowers the option to pay through EMIs or Easy Monthly Instalments. Others require semi-annual or annual payments.
Every lender requires the borrower to provide certain documents to approve and sanction the loan amount. This type of loan requires minimal documentation. The processing procedure takes around 3 to 4 days.
Any eligible individual who is at least 21 years old can apply for a loan against property. The upper limit when it comes to age for this type of loan is set at 65 years.
A loan against property can be acquired by salaried applicants, self employed individuals, IT assesses, and numerous other Indian citizens.
Here is a look at some of the benefits of acquiring a loan against property:
Lower Interest Rates – One of the most significant advantages of getting a loan against property is the low rate of interest they feature. Since this type of loan is deemed a secured loan, the lenders offer these loans at a lower interest rate than other types of loans. Lower interest rates translate to lower EMIs, allowing users to repay the borrowed amount easily.
Continued Property Usage – To acquire a loan against property, individuals must pledge any property as security. Mortgaging the property does not make the individual lose ownership. Hence, applicants can continue using the property even while it serves as the borrowed loan’s collateral. Individuals can pledge numerous types of property as the loan’s security, including residential properties, commercial property lands, etc.
Longer Repayment Tenure – Unlike other loans, a loan against property features a longer repayment tenure. This is primarily because a loan against property is a secured loan. Longer repayment tenures paired with low interest rates make opting for a LAP a lucrative option.
Higher Loan Amount – A loan against property facilitates individuals to cover big-ticket expenses, such as personal or business-related needs. Since it is deemed a secured loan, applicants are eligible to get a loan amount of 75% to 100% of their property’s market value.
Eligibility Criteria for Loan Against Property
To avail of a loan against property, individuals must fulfil a set of criteria to be eligible. The eligibility criteria vary for different individuals. Here is a detailed look:
Eligibility Criteria for Salaried Applicants:
- The applicant should be an Indian citizen.
- The applicant should be between 28 and 58 years of age.
- Working professionals at public-owned or private organisations should at least have three years of work experience.
Eligibility Criteria for Self Employed Individuals:
- The applicant should be an Indian citizen.
- The applicant’s age should be between 25 years and 70 years.
The applicant should be able to provide proof that they have a steady source of income.
What are the Documents Required for Loan Against Property?
Applicants who wish to apply for a loan against property must provide certain documents to proceed with the application process. Here is the list of documents required for a loan against property:
- PAN Card
- Proof of Identity
- Proof of Address
- Proof of Residence Ownership
- Proof of Business Existence
- Business Profile
- IT Returns of Last 3 Years
- Audited Financials of Last 3 Years
- Last 12 Months Bank Statement
- Last 12 Month’s GSTR Returns.
- Registered Sale Deed/Conveyance/Lease Deed
- Past Sale Deeds Chain
- Loan Statement
- Co-Applicants’ KYC and ITR of Last 3 Years.
Other Documents Required by Lender to Check Eligibility.
How to Use the Loan Against Property Eligibility Calculator
The loan against property eligibility calculator facilitates individuals to determine the loan amount they are eligible for based on different factors. It functions by analysing the following aspects:
- The applicant’s date of birth
- The applicant’s city
- The applicant’s monthly salary
- Loan tenor
- Monthly income from other sources
- Existing loans, EMIs, or other financial obligations.
Any individual who wishes to apply for a loan against property can conveniently determine the loan amount they are eligible for by inputting the aforementioned details in the calculator.
Things to Keep in Mind When Applying for a Loan Against Property
Individuals who wish to apply for a loan against property should keep certain things in mind. Here are some of the most important ones:
Review the lender’s eligibility criteria thoroughly – Different lenders have different requirements for providing a loan against property.
Hence, reviewing the lender’s eligibility criteria list would be best to ensure you do not get rejected and receive the loan amount you wish for. Moreover, fulfilling all the requirements enhances your chance of getting approved and fastens your loan processing pace.
Determine your property’s value – Every property, whether residential or commercial, has its own value based on numerous factors, such as age, condition, location, builder’s reputation, size, etc.
Hence, you should be aware of the property’s value to ensure that you get the desired loan amount from the borrower when you pledge your property as security.
Acquire an estimate of the amount you’d like to borrow – Not having an estimate of the amount you wish to borrow will make it harder for you to get the exact amount you require.
Hence, it is vital to get an estimate of the amount you need to borrow. You can create a list of expenditures you will pay for after getting the loan.
Compare the offers from multiple lenders before locking in on one – Thanks to the popularity of loans, many lenders are readily available on different platforms, waiting for customers to apply for a loan against property. To ensure that they have the most number of customers, lenders feature exciting benefits and schemes.
Hence, if you wish to apply for a loan against property, it would be best to compare the rate of interest offered by different lenders. Doing so will allow you to choose the best lender based on the benefits they offer.
Mortgage Loan Documents
Salaried individuals need to present the following documents to acquire a mortgage loan:
- Updated salary slips.
- Bank statements of the last three months.
- PAN Card
- Identity Proof
- Proof of Address
- Property Documents
- Income Tax Returns
- Title Documents
Self employed individuals need to present the following documents to apply for a mortgage loan:
- Bank account statement of the last six months
- PAN Card or Form 60
- Address Proof
- Identity Proof
- Income Documents (Income Tax Returns or Financial Statements)
The individual looking to acquire a loan against property must pledge a property as security to acquire a loan. Furthermore, they should fulfil specific criteria to qualify for a loan against property. Besides this, they should also offer documents required by the lender to proceed with their loan application.
Yes, individuals can get a loan against property on property documents besides providing other required documents.
Different banks offer different benefits when it comes to loan against property. To determine which bank is the best, individuals should compare the benefits each offers and opt for the one that benefits them the most.
Depending on their property’s condition and other factors, individuals are eligible for loan amounts up to 100% of their property’s overall value.
Different platforms take different lengths of time to process a loan against property. It generally takes lenders a week or two to process and disburse the loan amount.
It is not possible for individuals to get a loan against property without proof of income since it is a must-have document.
Yes, in some cases, it is possible to get a loan without providing salary slips.