loan against property

A secured loan option, which allows individuals to borrow funds from financial institutions, in return for a property that they have to pledge as security, is known as a Loan Against Property. As they are secured loans, they are offered at a lower interest rate. Anyone with a residential or commercial property can apply for a lap loan while also using the property for their personal use.

Loan against property has become a common financial tool among borrowers because:

  1. The interest rate is lower than that of a personal loan.
  2. The loan allows for freedom of usage.
  3. The applicant can still occupy and use the property pledged. 

Though there are various benefits, it is important to know all the details about a loan against property.

Important Things to know before taking a personal loan

For L. A. P, the applicant is required to fulfil some eligibility criteria, fill an application form, and look at certain important details, to ensure that they do not put themselves into any financial trouble.

=> Eligibility Criteria: The eligibility criteria for applying to loan against property are:

  1. The applicant must be between 21 to 60 years of age for salaried individuals and between 25 to 65 years for self-employed individuals.
  2. The applicant must be either self-employed with a stable source of income or a Salaried employee in an MNC, a private company or the public sector.
  3. The applicant must have a CIBIL score of over 700.
  4. The applicant must be able to submit the following documents:
  • Income Tax Returns for the last two years
  • KYC Documents
  • Form 16
  • Bank statements for the last six months and salary slips
  • Documentation about the property offered as collateral.
  1. Loan terms: The loan terms in the case of a loan against property depends on the property being pledged.
  1. Loan Amount: You can get loan amounts up to 70% of your property’s market value.
  2. Interest rate: The interest rate depends on various factors like:
  • Your nature of work
  • The type of property
  • The current market value of the property
  • Available documentation
  • Your income
  • Your credit history.

=> Ownership of Property:-  The loan is offered to individuals who own the property. If the property is not in your name, then you can make the owner a part of the loan as well. The lender will only approve the loan after they are convinced that your property has a clear and marketable title.

Also, after you have pledged the property, you retain the freedom to use it for any purpose of your choice. However, you cannot sell the property to any third party. In case you default, then the lender has the freedom to sell the property to repay the loan amount.

=> Repayment capacity: As the interest rate on the property loan is lower than the personal loan, the EMI decreases. So, based on your repayment capacity you can reduce the tenure and complete the loan repayment faster. You can also opt to increase the loan tenure, to further reduce the EMI.

Your repayment capacity will also be calculated by the lender based on your income statements, repayment history, ongoing loans etc.

=> Loan usage: Similar to a personal loan, a loan against property funds can be used for any purpose of your choice. Unlike other secured loans, there are no restrictions to fund usage. Whether it is your wedding, higher studies, some vacation you are planning, a big purchase you want, home renovation, medical emergency or any other reason, a loan against property is your best choice to get the instant fund.

Though some people have their doubts about this loan, it is one of the safest and best financial tools for borrowing money from financial institutes. Apart from offering a higher loan amount, it comes with a lower interest rate and flexible repayment tenure.

Conclusion

There are various lenders available in the digital space today who offer loan against property. While they all offer the same service, the terms and conditions might vary. Thus, it is important that before you finalise a lender, make sure to carefully compare and evaluate the loan terms, and then make your choice wisely. It will help you not just get funds today, but also in staying away from any financial stress in the future.

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