Loan Against Property

About Loan Against Property

Loan against property (LAP), is one of the alternatives of personal loan, that a customer can avail by keeping their property as mortgage with the loan lending bank or financial institution. The loan is given as a certain percentage of the prevailing market value of the property (normally between 60-70% of the value of the property).

A customer can avail these mortgage loans against commercial property and residential property collaterals. Although such property is mortgaged to the loan lender, but the customer can still continue using it for residential or commercial purposes.

This is a secured loan as the property of the customer is kept as collateral with the bank. Also, these loans offer a lower rate of interest as compared to personal loans. LAPs are highly preferable in India as these loans are easily available in banks or loan lending financial institutions.

These are cost-effective along with an advantage of using the mortgaged property while the customer is still repaying the loan. In case, a customer fail to refund the loan amount, the lender has the right to auction the mortgaged property and recover the money.

Different banks offer with options of fixed interest rate and floating interest rate for the customers to choose from. The interest rate for fixed rate loan against property remains constant throughout the loan’s tenure. However, different banks charge different interest rates for fixed rate LAPs. Floating or adjustable interest rate is not fixed. This type of interest rate varies on the basis of current market conditions.

The customer can submit mortgage loan application for the following purposes:

  • Funding medical treatments
  • For child’s marriage
  • For expanding the business
  • For child’s higher education
  • Funding for dream vacation

 

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Benefits of Loan Against Property

  • Lower Interest Rate: Since the loan is availed keeping the property as security mortgage, the interest rate is generally lower as compared to personal loan.
  • Longer Tenure: These loans come with a longer tenure up to 15 years while home loan tenure is for 5 years.
  • Lower to No Prepayment Charges: Loan can be cleared and closed by making prepayments. These prepayments are not chargeable in case of LAPs.
  • Easy to get: These loans are easily available as these are secured loans with a property as mortgage in the banks.
  • Lower EMI: As these loans are available with longer tenure, eventually the EMI gets lower. This becomes easy for the customer who cannot afford paying higher EMIs

Nonetheless, it is always advisable to the customers to take loans for shortest term as the interest amount will be lower in case of short tenure loan.

Different Types of Loan Against Property

  • Loan against rented commercial property
  • Loan against self-occupied commercial property
  • Loan against vacant residential property
  • Loan against rented residential property
  • Loan against industrial property

Eligibility Criteria for Loan Against Property

The eligibility criteria for salaried individuals, professionals and businessmen who are self-employed are usually similar. The general eligibility criteria to avail Loan Against Property are as follows:
  • The applicant must be a citizen of India.
  • Minimum age of the applicant must be 21 years at the time of application submission.
  • The applicant must have an employment record at any organization or should be involved in a current business for a specific number of years.
  • The applicant must earn a minimum required salary as well as have the capacity of repaying minimum amounts monthly.
  • The applicant should have a good credit history with track record of timely loan EMI payment and credit card bill payment.

Documents Required for Loan Against Property

Depending on whether the customers are self-employed professional or salaried or self-employed businessman, different loan lending institutions ask for different set of documents. The essential documents needed for loan against property are listed below: For Self–employed Professionals:
  • Duly signed and filled application form
  • Identity proof
  • Age proof
  • Address proof
  • Certificates of educational qualification, degrees and other academic credentials
  • All registrations/licensing certificates relating to their profession
  • Business existence proof and profit and loss statement of the company
For Salaried individuals:
  • Salary certificate or latest salary slips
  • Form-16 issued by current employer
  • Copy of the employment letter to prove job continuity
  • Latest six months of bank statement of all the bank accounts
  • A cheque for the processing fees incurred by the bank in processing the application
  • And all the above-mentioned documents mentioned for Self-employed professionals
For Self–employed Businesspersons:
  • Proof of identity and residence proof
  • Bank statements of last six months prior to the one in which the loan is applied for
  • And all the above-mentioned documents mentioned for Self-employed professionals

Top Providers for Loan Against Property in India

  • State Bank Of India
  • Bank Of India
  • Punjab National Bank
  • Syndicate Bank
  • Bank of India
  • HDFC Bank
  • ICICI Bank
  • Axis Bank
  • Standard Chartered Bank
  • IDBI Bank
  • City Bank

Loan Against Property FAQs

Loan against property (LAP), is one of the alternatives of personal loan, that a customer can avail by keeping their property as mortgage with the loan lending bank or financial institution. The loan is given as a certain percentage of the prevailing market value of the property (normally between 60-70% of the value of the property).

  • These are the common factors taken into account while determining the eligibility of loan against property
    Income
  • Age (Min. 21 Years)
  • Property Valuation
  • Existing Liabilities (if any)
  • Current Work Profile
  • Financial Documents
  • Number of Dependants

Yes, you can apply for this loan jointly with your spouse as well as family member.

Yes, a nominal fees and charges are to be paid to the Bank depending upon their terms and condition.

Generally the processing of this type of loans takes 7 to 10 working days once all the required documents are submitted. It also depends upon your profile and documentation.

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