Today we are going to talk about loan against property (LAP). In this article, we will cover these topics.
- What is the loan against property?
- Things to know about loan against property.
- Buying property tips.
- Why is the loan against property not always the best solution?
- Difference between Mortgage Loan & Loan Against Property (LAP).
What is a loan against property?
A loan against property is a loan taken against your home, apartment, or a plot.
It is cheaper than of a personal loan or loan against security.
The loan can be applied even if you stay in it or given it to on rent. Usual, y bank and other lender extend a loan against property as a security, for up to 50% to 60% of the market value of the property value.
However, Extend of the loan is subject to your eligibility as per the banking rules.
It is available for both, Salaried and self-employed, and commercial as well as residential property.
The minimum quantum of loan against property is around 2-3 lakhs, and the maximum quantum of loan against property is 2-5 crores.
Things to know about loan against property.
Application processes steps involve in the application process are:-
Eligibility: – the banks will decide the loan of amount base on your repayment capacity.
Repayment capacity takes into consideration factor such as income, age, and qualification, number of dependents, spouses income, asset, liabilities, stability, and saving history.
However, the eligibility of loan shall not exceed 50 to 60% of the cost of property in a majority of the cases.
Age: – this kind of loan generally sanction for the borrower of the minimum age of 21 to 24 years and the maximum age can be around 60 years for a salaried employed at the time of the majority of the loan.
And for self-employed can be around 65 years of age.
Income: – for salaried employed banks demand and identity as well as residence proof.
- 6 months bank statements
- Salary Slip
- Form 16
- Copy of the property documents
For self-employed (Businessmen) need to present: –
- 3 years financial statement in addition to the above.
Compare from the different-different bank, interest, EMI, Document Requirement, for Loan against property & mortgage loan.
Check Experience, Credit History, Tenure, Interest Rate, etc for Loan Against Property
Experience: – Some bank demand a minimum work experience 1 to 5 years for salaried peoples. And the self-employed need to be in the business 2 to 5 years.
Credit History: – Credit history play very important role to section a loan. The CIBIL score plays a very important part and if the borrower credit history is poor, is liable to reject the loan.
The title of the property needs to be clear.
Who can be a co-applicant to the loan: – You can include your spouse as a co-applicant to the loan. Their income can be added in hand the loan amount.
If there is more the one owner of the property, all of them need to the joint applicant to avail the loan.
Tenure: – the tenure of the loan depends on the bank to bank. The tenure of prepayment of these loans 1 to 10 years which can be extended to 15 years.
Interest Rate: – on a floating basis for a loan taken against property are in the range of 12 to 16% per annum.
Can this type of loan prepaid. Yes, this kind of loan can be pre-paid; prepayment charges are in the range of 2 to 3 % of the outstanding principal if the loan is prepaid between 6 months to 5 years.
Benefits of availing the loan against property
The further need of money can be a benefit for you in many ways like marriage, medical expenses, education expenses, etc.
The low rate of interest makes a loan against property an attractive option when compared to personal loan only a home loan has a low rate of interest than loan against property.
The tenure of personal loan can be a 1 to 5 years when comparing loan against property which is 1 to 10 years.
The processing time of loan against property is lesser than a home loan.
Buying property tips.
- Compare offers from different banks.
- Keep all documents ready
- Expect around 50-60% of the value of the property as the loan.
- Stamp duty on the loan documents to be borne by the applicant.
- Co-applicants enhance loan eligibility.
- Note the rate of interest rate, processing fees, pre-payment charges and interest-schedule.
Why is the loan against property not always the best solution?
Loan against property comes at a low rate of interest as compared to a personal loan, but there is catch here.
As the property is mortgage with the bank. It will ascertain the ownership of the property and the remaining life of the property before lending money.
This process may take anything between couples of weeks to a month.
If you are in a hurry to raise money loan against property may not be suitable for you. In that case, you may have to resort to other options.
Such as, loan against share, loan against insurance policy which come with low-interest rates as compared to the personal loan and are quick too.
Difference Between Mortgage Loan & Loan against Property
- Are loans, in which the loan candidate should give a property or any security as mortgage loan?
- The Mortgage loan can be land or resources like gold, securities, protection and etc.
- There are very few mortgage loans free, for example being a personal loan.
- The most different loan requires a mortgage or security to encourage a loan demand from the bank or NBFC (non-saving money budgetary organizations). Home loan is a kind of mortgage loan.
Loan against property
- The loan is given to a property which is held as a security.
- The loan can be against any property of the loan candidate and not really against a private property.
- It can be encouraged by selling any property which remains for the sake of the credit candidate.
- Here, the amount given as loan is regardless of reason and can be utilized for any quick financial requirement, not at all like a home loan.