Loan against Property

For those who own property, loan against property (LAP) is a wise alternative to personal loan. Loan against property is a secured loan. As a borrower you pledge some property as security against which loan is issued.

This loan can be borrowed for personal purposes like child's marriage, vacationing, home renovation, medical expenses and business expansion. Two types of loans against property- EMI based loans and overdraft.

Eligibility for property loan

Anyone who owns property can have a loan against property. Salaried individuals and self employed professionals and businessmen can borrow against property. Lenders need to be satisfied about the repayment capacity. Different lenders have varying criteria to who they will lend based on annual income, firm where employed, length of service, age, number of dependents, assets and liabilities, credit history etc.

Maximum and minimum loan amount 

Lenders give a maximum of 40-60% of the market value of the property. Many lenders accept both residential and commercial property for security. The market value of the property should not be less than Rs 5 lakhs. Minimum amount of loan hovers close to Rs 2 lakhs and maximum amount at Rs 500 lakhs to Rs 1 crore.

Documentation for property loan

Standard documents required are proof of residence and identity, latest bank statement or passbook showing entries of past 6 months, latest salary slip, form 16 and title documents of the property. 

In addition to these (excluding salary slip and form 16) self employed professionals and businessmen would require furnishing certificates of educational qualification and proof of existence of business. They would also need to provide Income Tax returns of last 3 years of both business and self. Some lenders might ask for Profit and Loss and Balance Sheet of the previous years.  

Interest and fees for property loan

Interest on loan against property is lower than that on other consumer loans. Currently it is between 13% and 15.5%. Repayment term can be as long as 20 years, in case of some lenders. The usual fees applicable for loans such as processing fees which is 1-2% of loan amount is charged. Banks may charge fee for prepayment.

If one is in dire need of money and owns a property, loan against property is an economical means of obtaining it.

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