A property is an asset that not only creates wealth through value appreciation but also helps one in times of need. While you can always liquidate your property to fulfil an emergency or any other personal or professional goals, it should be considered as the last resort. Instead of selling their property, borrowers should try to arrange for funds without selling their property and instead, pledging it as collateral to a bank/lender. In other words, avail of a loan against property.
1.What is Loan Against Property?
A loan against property is a secured loan, where an individual pledges his property as collateral. The Loan Against Property (LAP) is availed of by individuals when they need a large sum for any purpose, including expanding business, sponsoring a child’s education, meeting expenses related to marriage or medical emergencies. LAP can be availed by an individual having property. This property can be residential, commercial, or even an unconstructed piece of land. The tenor on LAP can go up to 20 years depending on the lender and the borrower’s capacity. The loan against property interest rate is lower than that of personal loan. The loan amount usually stands at 70-80% of property value and the repayments are done through EMIs (Equated Monthly Instalment). The loan against property interest rate varies depending on the lender, the borrower’s credit history, market value and type of property, borrower’s income and documentation.
2. Eligibility for Loan against property
LAP can be availed by any individual who is a resident Indian, above 25 years of age, and has a steady income. LAP can be opted by both salaried as well as self-employed/business owners. The CIBIL score tells about the creditworthiness of the borrower. You should have a CIBIL score of over 700 points to be eligible for LAP. The property should have a clear title and be free from any legal issues.
3. Documents needed for LAP
There are certain specific documents required for your LAP application to be processed. These documents may vary depending on the type of borrower. These documents are:
- Proof of identity- PAN Card, Aadhaar Card, Voter ID, Passport, driving license, etc.
- Proof of address- passport, electricity bill, Aadhaar Card, etc.
- Property documents- Copy of original sale deed, allotment possession letter, NOC from society
- Income proof- Income Tax Return Certificate, Form 16, salary slips, in case of a salaried employee, and audited financial sheet, certificate of practice, qualification certificate, Shop Act License, Sales Tax Certificate, etc., in case of self-employed or business owner.
4. Loan against property EMI calculator
The loan against property EMI calculator helps one calculate monthly repayments on the loan amount. The LAP EMI Calculator is available online as well as on the lenders’ websites. One needs to enter details, such as principal amount, tenor, and interest rate, to get the exact monthly EMIs. It is necessary to evaluate the monthly repayments using an EMI calculator as they help one plan their finances for future expenses and savings. Knowing the EMI in advance also helps to compare offers by other lenders and help one select the most suitable one.
5. Apply for LAP
The process for LAP is quick and easy. Most of the banks will approve and disburse the loan within 4 days. To apply for LAP:
Fill an online application form with your basic personal, employment and property details. Next, a representative of the lender will reach out to you and verify these details. Once the application is accepted, the representative will collect identity, income, employment and property-related documents. The lender will, then, verify these documents based on the application and offer you a loan.
Once the offer is accepted, the lender will evaluate your property for any legalities and disputes and if everything is in line, will offer you the loan.
After loan approval, the funds will be disbursed into your bank account and you can then start repaying the loan monthly in the form of EMI.
6. Balance Transfer
If you are unhappy with your existing lender either due to poor service or due to a higher interest rate, then you can always opt for a loan against property balance transfer. This facility allows borrowers to transfer their outstanding loan amount to a new lender offering lower interest rates along with other benefits, such as reduced processing charges, penalties, etc. By refinancing/transferring their loan against property at lower interest rates, borrowers can reduce their EMIs and total interest cost on the loan.
Due to growing expenses, we often need large sums of money. The easiest way to arrange such funds is to reach out to a bank and avail of a loan by pledging property as collateral.