A loan against Property (LAP) is a secured loan where a borrower offers his property as a security collateral to obtain funds from the bank and financial institutions. It is one of the most popular forms of credit facility given by banks to individuals and businesses who are looking for small to large sums of money for personal or business needs.
A loan against property can be raised against the following types of collateral:
- Residential House Property
- Commercial Property
- Industrial Property
- Industrial gala/shed
- Residential/commercial/Industrial lands
Whereas, for giving a loan against property/collaterals, banks also require an established business and income to secure timely repayments.
The bank will evaluate your eligibility based on various parameters such as the value of the property, financial repayment capacity, credit score, etc. Once the evaluation is complete, the lender will disburse the loan amount within a few days and the property will be mortgaged through simple mortgage or registered mortgage as per their policy.
Loan against Property Interest Rate
The interest rate on a loan against property depends on the lender, the loan amount, and the type of collateral offered by the borrower. It is usually lower than other forms of credit such as personal loans or credit cards as it is a secured loan.
Generally, banks offer the lowest interest rates comparable to others 8.5% to 9.5%
NBFCs offer slightly higher interest rates starting from 9% to 16%
Loan Against Property Eligibility
- Minimum Age 23 years and maximum age 65 years
- Must have Indian nationality
- 700 is the minimum CIBIL score required
- Minimum Salary: Rs.15,000 pm, but the preferred salary could be Rs.25,000/- per month
- Minimum ITR required Rs.3,00,000/- in case of self-employed
Documents Required for LAP Loan
The following documents are generally required for availing a loan against property:
- Identity Proof – PAN Card, Aadhar Card, Voter ID, Passport, or Driving License
- Address Proof – Aadhar Card, Voter ID, Passport, Utility Bills or Rent Agreement.
- Property Documents – Property Title Deeds and Chain documents, Encumbrance Certificate, Sale Deed, Registration Details, and Municipal Approval Plans.
- Income Proof – Latest Salary Slip, Income Tax Returns, Bank Statements of last 6 months, TDS Certificate.
- Business Proof – Business Registration Certificate, GST Certificate, Shop Act License, Tax Returns.
- Bank Statements – 6 months’ bank statements of all accounts
Features & Benefits of LAP Loan:
- Higher Loan Amounts: A loan against property provides higher loan amounts as compared to traditional personal loans.
- Lower Interest Rates: Since a loan against property is a secured loan, the interest rates are lower as compared to unsecured loans like personal loans.
- Longer Tenure: Loan against property allows you to repay the loan over a longer tenure, usually up to 15-20 years.
- Easy Eligibility: A loan against property is easier to get as compared to other loans provided that you have a property to mortgage.
- Flexible Repayment Options: Lenders offer flexible repayment options with the loan against property. You can choose to pay your EMIs on a monthly, quarterly, half-yearly, or yearly basis.
