Loans that are availed by pledging property as collateral has termed a loan against property. Lenders accept the borrower’s property as security against the approved loan amount. A loan against property is also called a mortgage loan, given the loan is acquired by mortgaging the borrower’s asset.
The property loan interest rate, eligibility criteria, documentation, and the application process will vary across lenders. Here is a detailed idea about loans against property.
Top features of loan against property
Loans against property come with the following features:
Substantial loan amount
The loan amount sanctioned in a LAP is quite high. Individuals can borrow up to 90% of their property value while applying for a loan against property. This will, however, vary on the lender, borrower’s profile, etc.
Comparatively lower interest rate
The property loan interest rate rate is low compared to other financing options as the property is pledged as collateral. Borrowers can compare the interest rates of multiple lenders and select one as per their preference. To avail of even lower rates, one needs to have a higher CIBIL score and pledge a property located in a prime location with modern amenities. There are various other factors that can impact the LAP interest rate.
Flexible loan tenor
A flexible loan tenor allows the applicant to repay the borrowed amount conveniently. The shorter the loan tenure, the lower will be the interest outflow.
No end-use restriction
So, be it wedding expenses, higher education costs or a medical emergency, a loan against property can be quite a useful financing option.
What are the things to know before applying for a loan against property?
Borrowers must take note of the following factors before applying for a property loan:
Eligibility criteria
The different lender sets different eligibility criteria for a property loan. Thus, borrowers must learn the requirements properly before applying for a loan against property from a lender. It will help borrowers to get easy and fast approvals.
Value of the property
Property value determines the loan amount that an individual can borrow against their property. For instance, the sanctioned amount will be low if the property is old and located in a remote area. However, the loan amount will be higher for a new property close to hospitals, markets, railway stations, etc.
Interest rates offered by multiple lenders
Mortgage loan interest rates varies with the lenders, so borrowers should compare the rates before selecting a lender. Individuals can use an online LAP interest rate calculator to calculate the EMI outflow and loan affordability.
Estimate of the amount needed to borrow
Borrowing a colossal amount unnecessarily can make a borrower face difficulty in repaying it. As a result, borrowers’ CIBIL scores and their credit history can be affected. Hence, borrowers should estimate their needs and apply for the same amount for easy re-payment.
Who can Apply for a Loan Against Property or a LAP Loan?
Salaried employees and self-employed individuals can both apply for lap loans. However, borrowers of each category should meet the following requirement to apply for LAP:
Nationality: Both salaried and self-employed individuals should be residing Indian citizens.
Age: For salaried individuals, the age limit is 28-58 years, and for a self-employed individual, it is 28-70 years.
Income: Salaried employees should have at least three years of working experience in a private or public sector company, MNC, etc. However, a self-employed person should have a stable income source.
Besides, borrowers must arrange the necessary documents for applying for a property loan. Various reputed lenders offer pre-approved offers on multiple financial products such as home loans, etc. These offers will help to streamline the loan application process.
How to apply for a LAP or mortgage loan?
Here are the ways to apply for a loan against property:
Borrowers should compare the property loan interest rate offered by different lenders and choose a provider accordingly.
Next, they should find out if they meet the eligibility criteria to apply for a loan against property.
After arranging the necessary documents, borrowers should fill up the application form on the lender’s official website.
The lender’s representative will get in touch and then guide you on the following steps.
After necessary verifications, the sanctioned amount will get transferred to the borrower’s account.
So, borrowers must arrange the necessary documents for LAP and know the eligibility and other factors before availing of the loan.
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