Comprehensive Guide to Know Everything About Loan Against Property

You are currently viewing Comprehensive Guide to Know Everything About Loan Against Property

Comprehensive Guide to Know Everything About Loan Against Property

  • Post author:
  • Post published:April 12, 2022
  • Post category:finance
  • Post comments:0 Comments

There are two major requirements to get a LAP: your credit score and some collateral. The most common types of collateral include real estate or any of your property.

An up-to-date copy of your credit report is also necessary – lenders will want to know where you stand financially before they agree to lend you money. A strong credit score can significantly increase your chances of getting approved for a loan.

Benefits of Loan Against Property

If you need money but cannot qualify for a loan, a quick loan against property can help immensely. Seeking a loan against property is a way of getting immediate cash to fulfil immediate needs like expanding a business or for marriage expenses. 

There are several other instances where LAP loans can prove beneficial, too; for example, if you need to raise some money quickly but do not have time to go through all of your options.

What Banks Look for

Usually, banks and other financial institutions require you to have a good credit score. But loan applicants with bad credit can still get loans from some private lenders.

Like all other loans, a loan taken against your house or property will be under fixed terms (the exact number of years it will take to repay), an interest rate, and monthly payments you must make on time.

The bank will also check your capacity to make repayments by limiting how much money you earn, how much pending debt you already have, your age, etc.

Loan Amount 

When it comes to loans against property, banks and NBFCs have their way of looking at things. A standard quick loan against property is disbursed based on 60 to 80% of the value of an asset; so, if your home is worth Rs. 10 lakh, you will get a maximum amount of Rs. 6 to 8 lakh for repayment in a specified tenure.

But NBFCs will look at net worth and earnings from business to decide how much they are willing to give as a loan against your assets. If they decide that your income is more than adequate and if they are satisfied with your property documents, then you might be eligible for a higher amount than with regular banks.

Interest Rates 

Interest Rate on Loan Against Property and traditional home loans are different. A home loan interest rate varies between 7-8%, whereas interest on a loan against property ranges between 10-11%.

Tenure of Loan Against Property 

A quick loan against property is issued for a longer period, i.e., 15 years. This gives you enough time to manage and plan your budget and expenses.

Eligibility For Loan Against Property 

The eligibility criteria for loans against property may vary a little from one financial institution to another, but they would be largely the same. What is important is that a LAP is one of the easiest credits available. It’s because of the secured nature of the loan. However, the following documents will be needed for a LAP:

  • Copy of the property’s document
  • Copies of PAN and Aadhar cards 
  • Salary slips for last 3 months
  • Bank Statements for last 3 months
  • IT Returns     

Whether an individual is working in a private firm or has a secure job at a government office, or running his own business, they can easily apply for a loan against property.

Documentation

During LAP application, submit the following for quick and hassle-free approval of loan against property:

  1. Salary slips 
  2. Credit reports
  3. Property ownership documents

Conclusion

A loan against property is usually a little more expensive as the interest on a loan against property can be higher than a home loan. It offers many benefits and serves as an alternative to collateral-free loans like home loans, car loans, etc. 

While this type of loan comes with risks, it is the best option if you have a low income or cannot provide collateral security. It works well if you want to set up your business or begin a startup.

Leave a Reply