How to Apply for Loan Against Property

Need a big loan, but don’t want to sell your assets? A LAP is your solution. Also called a loan against property, this is a type of secured loan where you use your existing property as collateral to get funds for your personal and business requirements. In this blog, we will walk you through how to apply for loan against property, who is eligible for it, its benefits, and what to consider before purchasing one.

What is a Loan Against Property?

A loan against property is a secured loan that is useful for both salaried employees and businesses. The loan gets sanctioned when you pledge your property in exchange for it. The financial institution then approves the credit amount, which is equal to the current value of your property mortgaged. As the borrower of the loan, you can give a property as collateral that is self-occupied, rented, or any piece of land of which you are the owner. 

The purpose of a loan against property is to provide funds at the time of medical emergencies, weddings, travel, business expansion, or education. 

Which Properties are Eligible for a Loan Against Property?

Not every property is considered applicable for a loan against property. Typically, a lender accepts the following types: 

1. Residential property: A house you live in or any other house that you own. It can also be a rented place.
2. Commercial Property: Workspace, shops or commercial buildings can also be given out as collateral. 
3. Industrial Property: Some finances also allow industrial properties, which may include factories, provided the financier’s policy permits.

Benefits of a Loan Against Property

1. Long repayment tenure: A LAP has a long repayment period that can stretch up to 15 years.
2. Low interest rates: In comparison to other unsecured financial tools like personal loans, loan against property interest rates are lower.
3. Lower EMI: Because you get a longer repayment period, you also get lower EMI.
4. Easy to obtain: Getting a loan against property is easy, as it is a secured loan that banks do not hesitate to provide. If you have a property, you can give it as collateral to a reputable bank and get a loan for your monetary requirements.

Eligibility Criteria for a Loan Against Property

The following table depicts the eligibility criteria for a loan against property:

How to Apply for Loan Against Property Online

Below is an easy-to-follow process to apply for a loan against property online:

1. Look for various lenders: different lenders with different interest rates and repayment periods. Online comparison tools can help you understand the best available loan against property.
2. Check eligibility: Before applying, make sure you satisfy all the criteria for stable income, property ownership, and loan amount. 
3. Documents: Make sure all the necessary documents are available. In most cases, please include documentation of property ownership, identity, proof, income statements, and bank statements.
4. Application: Most lenders have a simple online application process. You enter all the required information, upload your documents and submit the form.
5. Wait for approval: the lender analyses your application based on the value of your property. If everything seems fine, they approve it, after which the loan amount will be disbursed.

Factors to Consider Before Applying for a Loan Against Property

A loan against property is an efficient financial product when you are in need of substantial funding. However, there are certain factors you must keep in mind before applying for one :

1. Loan amount: The amount you will be getting reflects your property's value. The lender offers you a percentage of the market value of your property when you apply for a loan.
2. Interest rate: Secured loans offer cost-effective interest rates because security backs them. However, the interest rates vary from lender to lender.
3. Repayment ability: You must calculate the amount of the loan and the tenure that you could easily repay from your monthly income. The longer the repayment period, the more installments you will have to pay, along with increased interest rates.
4. Other charges: There are different charges like pre-payment and foreclosure fees, which are around 2 to 4% on fixed-rate loans. 

Tips for Getting the Best Loan Against Property

• Compare Interest Rates: Always check interest rates from multiple banks or NBFCs to find the best and most affordable option.
• Understand Your Eligibility: Make sure your income, credit score, and property value match the lender’s eligibility criteria.
• Know Your Loan-to-Value (LTV): Most lenders offer 50% to 70% of your property’s market value. Don’t expect 100% funding.
• Check for Hidden Charges: Look beyond interest rates. Understand all charges like processing fees, legal fees, and prepayment penalties.
• Keep All Documents Ready: Have your property papers, ID proof, income documents, and ownership details in order.
• Understand the Terms Clearly: Go through all the loan terms carefully, including tenure, foreclosure rules, and repayment options.

Read also : Is Taking Loan Against Property A Good Way To Consolidate The Debt?

Summing Up

To sum up, a loan against property is one of the most efficient financial products that can help you with funds at the time of monetary requirements. Your reasons for taking a loan against property can be different. For instance, some people take it for emergencies, some want to fund their child’s education, whereas others want to expand their business. All it takes is the right planning and a clear understanding of the process. So, whenever you are in need of funds for an important milestone or emergencies, apply online for loan against property and reap its value without even selling it.