Securing a Loan Against Property (LAP) is a strategic financial solution for individuals and businesses looking to leverage their real estate assets for significant financial needs. Offering lower loan against property interest rates compared to that of unsecured loans, an LAP can help finance major life events and business ventures.
This blog delves into the nuances of securing a loan by mortgaging your property, emphasising the benefits, loan against property eligibility, and the necessary documentation required.
What is a Loan Against Property?
A loan against property is a secured loan where borrowers pledge their residential or commercial property as collateral. The ownership remains with the borrower and they may continue using their property as before. The property remains mortgaged with the lender until the borrower has repaid the loan amount. The loan amount disbursed is based on the market value of the property being pledged. This loan has no restriction on end usage.
Features and Benefits of Loan Against Property
- High loan amount: Borrowers can obtain funds up to 60-80% of their property’s market value, providing substantial capital for large expenditures and ensuring quick access to high loan amounts.
- Extended repayment tenures: Tenures can extend up to 20 years, offering flexibility and reduced monthly payment pressure.
- Overdraft facility: The borrower can withdraw funds as required from a predetermined credit limit during the loan tenure. Interest is charged only on the amount utilised.
- Lower interest rates: Loan against property interest rates are lower than those of unsecured loans, offering a cost-effective method of financing major expenses.
Applying for a Loan Against Property
The loan against property application process is designed to be straightforward:
- Online Application: Begin by filling out the application form on the lender’s official website.
- Branch Visit: Alternatively, visit the nearest branch.
- Document Submission: Provide all required documents for verification.
- Loan Approval and Disbursal: Following successful verification and evaluation of the property to be mortgaged, the loan is approved and funds are disbursed.
Loan Against Property Eligibility Criteria
The criteria for Loan Against Property eligibility are designed to be inclusive, catering to a broad range of applicants. It may vary depending on your lending bank. But a generalised criterion is as follows:
For Individuals:
- Age Requirement: Applicants should be at least 21 years old. The maximum age at loan maturity is 65 years or retirement age, whichever is lower.
- Employment Status: This includes both salaried individuals in reputed organisations and self-employed professionals with a steady income.
- Income Proof: The latest income tax returns for self-employed individuals and salary slips for salaried applicants are necessary documentation.
For Businesses:
- Business Type: Eligible entities include proprietorships, partnerships, and private and closely held public limited companies.
- Financial Documentation: Requires audited financial statements for certain turnover thresholds or CA certification.
Documentation for Loan Against Property
To apply for a Loan Against Property, applicants generally need to prepare the following documents:
- Application Form: Filled out with attached photograph.
- KYC Documents: Identity Proof, DOB Proof, Signature Proof and Address Proof
- Proof of Income: Recent tax returns and salary slips, depending on employment type.
- Property Documents: Comprehensive documentation of the property to be mortgaged.
- Bank Statements: Last six months’/twelve months statements from primary bank accounts depending on loan amount.
A Loan Against Property offers a viable solution for those in need of substantial financial resources, allowing them to capitalise on the equity of their property. A structured approach to understanding and applying for a loan against property ensures that potential borrowers can make informed decisions.
Consider reaching out to providers like IndusInd Bank, they offer customised financial products that meet diverse customer needs, and have a smooth and efficient loan application process.
