Know All Before Applying for a Loan Against Property

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5 Min 16 Dec 2023

Highlights

Loan Against Property: A Comparison
Loan Against Property: Interest Rate, Eligibility, Repayment Tenure

What is a Loan Against Property?

A Loan Against Property (LAP), also known as a mortgage loan, is emerging as a preferred option when it comes to availing of a sizeable portion of finance. The most appealing part about a property loan is that you can spend the loan sum for housing or business-related needs, or for debt consolidation.

In simple terms, it is a secured loan that an individual can obtain from a lender with a residential or commercial property kept as collateral. The property is an asset that acts as a security for the lender.

Features of Loan Against Property

A comparison between Loans Against Property and other loan types, such as a personal loan shows us why Loans Against Property are a worthwhile option, given its attractive features.

Loans Against Property	Other Loans
They are secured	They are mostly unsecured
They offer a sizeable loan amount	The amount offered is limited
They have a flexible loan tenure spanning several years	They come with shorter tenures
They come at competitive interest rate	They come at comparatively higher interest rates

Also Read: Loan Against Property vs Home Loan

Things to Remember Before Applying for a Loan Against Property

When you apply for a Loan Against Property, your eligibility is first taken into consideration. Some of the factors that constitute your eligibility is your age, nature of employment, nature of income, and of course, the value of the property against which you are applying for a loan. Based on the above factors and a few more, your loan application will either be accepted or rejected. The Loan Against Property interest rates start as low as 9.40%* p.a. for self-employed individuals and can go up to 18.00%* p.a. depending upon your credit score and other contributing factors.

Interest Rate

The Property Loan interest rates are often competitive, owing to their secured nature. Here are some factors that affect the interest rate you stand to get on your Loan Against Property.

1. Credit score

The credit score is a representation of an individual’s credit health. While determining the interest rate, lenders consider the credit score to arrive at a suitable rate.

2. Income Profile

An individual’s income profile is also assessed, as it mirrors their repayment capacity. Lenders take it into before they offer the loan terms to you.

Simple documentation and eligibility

There are two application categories for Loans Against Property:

Salaried and Professional
Self-Employed Applicants

However, it is important to note that the application process, fees, and necessary documents may vary from lender to lender.

1. Salaried Individuals

This is for individuals who are salaried employees of a public, private or a multinational organisation. An individual should ideally be a residing citizen of India, between the ages of 23 and 60 years**. Documents to be presented by these individuals include but are not restricted to:

Valid proof or means of identification
Mandatory documents such as PAN card or Form 60
Proof of existing residence
Last 3 months’ salary slips
Bank statements for the last six months

2. Self-Employed Individuals

This category of individuals should be business owners, residing in India between the ages of 23 and 70 years** old. Documents to be presented by this category of individuals also include, but are not restricted to the following:

Valid proof or means of identification
Mandatory documents such as PAN card or Form 60
Proof of business
Proof of income from the existing business
Bank statements for the last 6 months

Besides these necessary documents, the property of the applicant is also evaluated to determine the loan amount. Readers should note that this is a generic list, and the actual documentation requirements may vary depending on the lender.

**The upper age limit is considered as the age at the time of loan maturity. Additionally, the upper age limit for applicants is subject to change, depending on the property profile.

Repayment Tenure

Most lenders set the repayment period from 2–17 years. A tenure that stretches up to 17 years offers borrowers the flexibility to repay the loan at their own pace while making part-prepayments at no additional costs if they are individual borrowers with a floating interest rate loan.

Additional Read: How to Pick the Right Loan Against Property Tenure

Final Thoughts

Securing funds through Loans Against Property is a favourable means to meet any financial need that may arise. The benefits of competitive interest rates, long tenures and easy balance transfer options make a steady case for a Loan Against Property.

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