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How to Get a Loan Against Property?

Editorial Team

 

How to Get a Loan Against Property and the Maximum Amount Available?

An asset that can be utilised in an emergency is real estate. You may apply for a loan using your privately owned home or commercial property. The loan is provided by the lender based on the value of the collateral property and your income in order to repay the borrowed funds.

A fully finished residential or commercial property can be used as collateral to get a loan. Depending on the property and your eligibility, lenders can provide the loan. You can secure loans up to 70% of the total market value of the residential property. For commercial property, you can get loans up to 60% of the property’s market value.

Using your property as security or collateral, you can apply for a secured personal loan through the Loan Against Property (LAP) scheme. The loan against property interest rate is competitive as these loans come under the secured loans category. 

Factor Affecting the Interest Rate on a Loan Against Property

  • Loan Payback Period – The lending institution’s interest rate is based on the loan repayment period. Higher interest rates are charged when the repayment period is shorter.

  • Credit Score: To qualify for a loan against property with reduced interest rates, you must have a good cibil score of at least 700.

  • Property type: The lender’s interest rate is based on the type of property and its market value.

  • Profile of the applicant: The lending institution’s interest rate is also based on the applicant’s age, profession, and income, among other factors.

Eligibility criteria for Loan Against Property

Property Type

The property should be in India (residential or commercial)

Age Requirements

  • Salaried professionals: 21 to 60 years

  • Self-employed professionals: 25 to 65 years

  • SME: minimum two years old

Employment type

Salaried or self-employed professionals

CIBIL Score

700+

Others

Registration certificates, tax receipts for real estate, sales deeds, and other official real estate documents approved by the Indian government.

 

Documents Required 

– KYC Documents 

– Last two years’ Income Tax Return Returns

– Form 16

– Last six months’ bank statements and salary slips

– Audited financial sheet

– Documentation related to the property offered as collateral

Features and Benefits of Loan Against Property

Lowest Rate of Interest

Secured loans typically have a lower rate of interest compared to unsecured loans. In addition to that, if you have a good credit score and credit history, the chances of you getting a loan at a low-interest rate go up.

Simple Documentation 

A loan against property typically has a simple documentation and approval process. In this scenario, the collateral is the property used to secure the loan. 

Flexible Repayment Term

Most loans secured by property have adjustable loan repayment terms. Depending on the lender you select, you can get a loan with a 15-year repayment period.

Property Ownership 

In the event of a loan secured by property, the borrower will continue to own the asset. The ownership of your property does not change when you use it as security for a loan. If unable to repay the loan, the lender can sell the property to recover the loan.

Pre-Closure Facility 

You can pre-close your loan secured by a property. You won’t have to pay any penalties for pre-closing the loan if the loan you have obtained has a variable interest rate. However, if your loan has a fixed interest rate, you only have to pay a nominal amount.

Optimal Utilisation of Property

If you apply for a loan and put up a piece of property as collateral, you can use the loan amount to cover your expenses. Additionally, you still will have ownership of the property, so you can use it the way you want. However, the property documents will remain with the lender. Overall, if you choose not to sell your property, you can still access inexpensive financing that will provide you with the funds you need.

 

Wrapping it Up

 

Always compare lenders’ interest rates to see which offers the lowest rate and best meets your needs. Before taking out the loan, verify the processing cost, pre-payment penalties, and other fees. And lastly, carefully discuss and analyse your options before you sign the loan document.

 

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