A loan against property (LAP) is a secured personal loan that you can avail of by pledging your property as collateral. These loans, also known as mortgage loans, are a popular choice for individuals seeking substantial funds.
Loan Against Property Interest Rate
The interest on loan against property varies from one financial institution to another depending on several factors, such as the loan amount,loan tenure, and the borrower’s credit score. For instance, a bank can offer an interest rate ranging from 10.60% p.a. to 11.30% p.a., while another bank’s rates may range from 8.95% p.a. to 10.25% p.a. The variation is because of the age and gender of the borrower as well.
It is crucial to compare the interest rates on loans against property offered by different banks to secure the best deal. An online loan against property calculator can also prove to be a handy tool in this regard, helping you determine your potential monthly instalments based on the loan amount, interest rate, and tenure.
Eligibility for Loan Against Property
The eligibility criteria for a loan against property are given below:
For Salaried Individuals
- The applicant must hold a permanent position in either the government or a well-regarded private company.
- The applicant must be in their early twenties at least when the loan begins. The maximum age at loan maturity should be lower than the retirement age
For Self-employed Individuals and Professionals
- Any person who submits income tax returns is eligible to apply.
- The potential borrower must be in their early twenties at least when the loan begins and up to 70 years old when it matures.
Other General Criteria
- The individual applying for the loan against property should be a resident of India and hold Indian citizenship. Furthermore, they should possess property located in a city where the lender conducts its operations.
- To increase the chances of loan approval for property, the applicant should have a CIBIL score of 700 or above.
Documents Required for Loan Against Property
To be eligible for a property loan, it is imperative to provide the subsequent documents:
- Proof of Identity: PAN card, Passport, Driving License, Voter ID, etc.
- Proof of Address: Passport, Electricity Bill, Aadhaar card, etc.
- Property Documents: Copy of original sale deed, allotment-possession letter, NOC from society
- Proof of Age: Passport, PAN card, etc.
- Income Proof: Latest Income Tax Return Certificate, Form 16 , salary slips, audited financial sheet, certificate of practice, qualification certificate, Shop Act License, Sales Tax Certificate, etc.
How to Apply for a Loan Against Property?
The process of applying for a loan against property is simple and direct:
- Begin the application process for a loan against property by visiting the lender’s online portal.
- After submitting your application online, the lender’s customer support team will contact you and request the necessary documents.
- Once you provide the required documents, the lender will verify them to ensure everything is in order.
- Along with document verification, the lender will also conduct a thorough inspection of the property linked to your loan application.
- If your application fulfils all the criteria and gets approved, the loan amount will be directly credited to your bank account.
Key Aspects that Lenders Evaluate for Approving Loan Against Property
When determining the eligibility for a loan against property (LAP), lenders scrutinise various elements to gauge an applicant’s creditworthiness and ability to repay the loan. Here are the principal factors that lenders take into account when assessing eligibility for property loans:
Income and Professional Status
A higher income signifies a greater ability to repay the loan, which in turn implies a lower risk for lenders. Individuals employed in multinational corporations, esteemed private sector organisations, public sector units, and government roles, as well as self-employed professionals such as doctors, chartered accountants, and traders, have a higher likelihood of securing loans against property at lower interest rates due to their stable income and high-income certainty.
The age range for applying for loans against property typically starts in the early twenties and extends up to 70 years at the time of maturity. Many lenders typically set the upper age limit for the repayment period of a LAP, which can extend up to 20 years and is often aligned with the borrower’s retirement age. Consequently, younger applicants are more likely to secure a LAP for longer tenures.
Lenders usually require that the total EMIs of their loan applicants, including the EMI of the proposed loan, fall within 50-60% of their net monthly income. Choosing a longer loan tenure can decrease your LAP EMI, so applicants with a lower eligibility can enhance it by opting for a longer loan tenure.
Lenders also consider factors such as the property’s age, location, legal status, title deed, and approval from local authorities when determining an applicant’s eligibility for a loan against property.
A loan against property can be a viable financial solution when you need substantial funds. However, before applying, it is essential to understand the terms and conditions for the loan. Always check the interest rate, eligibility criteria, and repayment terms before finalising the deal.