Everything You Wanted to Know About 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 however you deem fit.

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.

Interest Rate, Eligibility and Repayment Tenor 

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 9.50%* 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 62 years. Documents to be presented by these individuals include but are not restricted to: 

• Valid proof or means of identification
• 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 25 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
• 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.

Repayment Tenor

Most lenders set the repayment period from 2–18 years. A tenor that stretches up to 18 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 Tenor 

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 tenors and easy balance transfer options make a steady case for a Loan Against Property.