How Is a Loan Against Property Processed?

A Loan Against Property (LAP) is a secured form of loan that holds no restrictions on the end use of borrowed funds. It can be availed for a variety of purposes to fulfil any personal requirement like financing children’s education, family weddings, vacations and medical emergencies; or professional needs such as acquiring new office space, renovating or upgrading existing office infrastructure and so on.  

However, to secure this loan, applicants need to pledge either a residential or commercial property that is registered in their name. It should have a clear title, be free of litigation and must not be placed as security for any other loan. Property loans make it easier for borrowers to obtain high-value loan amounts at competitive rates of interest with flexible tenors and easy repayment options. 

The Complete Loan Against Property Process

The process for a Loan Against Property involves several steps as every loan application undergoes rigorous checks and verification. 

Assess Your Loan Eligibility 

Interested applicants can check the loan eligibility details on their lender’s website. They can also use an online Loan Against Property Eligibility Calculator to see whether they qualify for the loan by providing crucial information like their monthly income, expenses, city of residence, date of birth, existing obligations, preferred loan amount and tenor for which they seek a loan.   

Fill and Submit the Loan Application Form

The application form for a Loan Against Property can be submitted either online or offline. Individuals must enter all the particulars as asked such as personal details, loan amount, income details, tax status, employment status, property details, etc. The data you furnish here will be verified at a later stage, so ensure that the form is error-free. Any mistakes or wrong information could lead to loan rejection. 

Initial Verification

The moment lenders receive your LAP application, they will get in touch with you to confirm your personal details, residential address and property details. This is basically a preliminary check to evaluate your loan eligibility.  

Document Submission

LAP applicants need to furnish a set of documentation like KYC documents, income and employment proof, income tax returns, bank statements, property documents and other paperwork that lenders may call for. Keep the papers updated so that you can present them whenever necessary.  

Property and Documentation Assessment 

The lender conducts a thorough background check examining your employment status, income status, credit report and other personal records. Thereafter, they might meet the applicant to understand his/her credit requirement and financial health. This way they can ascertain their creditworthiness and ability to handle the loan.  

Lenders also undertake property assessments to determine its market value and scrutinise the documents for authenticity. Doing so enables them to establish the loan-to-value (LTV) ratio and decide on the quantum of loan to be sanctioned.  

Loan Against Property Approval

Once lenders are satisfied with the application process, they will discuss with you the probable LAP interest rates along with the expected terms and conditions. One has to sign the loan agreement if they accept the conditions, following which, lenders can approve the loan and begin the final process of loan disbursal.  

Loan Against Property Processing Fee

Lenders charge a certain fee for processing loan applications as administrative expenses. Normally, the processing fee stands between 1% - 2% of the loan amount, plus the GST.

Factors to Consider Before Applying for a Loan Against Property 

The very nature of a Loan Against Property calls for placing a valued asset as collateral. Further, one is obligated to set aside a major portion of their income towards repaying the loan which lasts for a number of years. Hence, availing a property loan is a huge financial decision and one should remember the following before applying for a Loan Against Property: 

Research Different Loan Schemes

Explore the LAP schemes of other lenders, their applicable interest rates and additional charges like processing fees, service charges, foreclosure charges, etc. Check online reviews and customer feedback. Then, compare each scheme through a Loan Against Property EMI Calculator to gauge your monthly outflow before picking the best deal.

Know the Market Value of Your Pledged Property

Your loan amount depends on the property’s market value and your own eligibility. So, access a free online LTV Calculator to know how much money you can borrow as a LAP. Applying within this range raises your chances of obtaining quicker loan approvals at lower interest rates. You can also get the property surveyed through experts to check its current valuation and ensure a fair loan deal. 

Check the Eligibility and Documentation Requirements

The eligibility criteria for property loans vary across lenders. So, consider the parameters carefully and see if you match them. Also, look up the list of essential documents and keep them ready.

There are several benefits of a Loan Against Property

It offers hefty funds in an emergency or for any other financial requirement. It also enables property owners to receive the requisite cash without losing ownership rights of the property. And if you wish to expedite the loan approval process, you can utilise the pre-approved offers to fulfil your commitments easily without unnecessary delays.