Loan against property – all you need to know!

People may require a loan for their short-term or long-term goals such as travel, wedding, education, medical expenses, and others. Since our savings cannot come to our rescue all the time, we tend to take a personal loan. However, such unsecured loans come at a very high-interest rate, and that can affect your monthly budget. No worries, banks and non-banking financial companies (NBFCs) have another product at their perusal which is the loan against property (LAP).

What is a loan against property?

LAP or a mortgage loan is a secured loan where you keep one or more of your properties as collateral. You can avail your loan amount, which is a fixed percentage of the market value of the property (40-60 per cent), by keeping any commercial or residential property as security. Since you keep your property as a mortgage to the lender, you cannot use it until you repay the loan amount. The interest rates are competitive, and they come with tenure up to 15 years. If you fail to repay the amount on time, the lender can seize your asset and cover the loan.

What are the eligibility criteria to acquire a loan against property?

Salaried and professional or business person can avail of the loan against property. The other underlying conditions are:

  1. Must be an Indian resident
  2. Should be 21 years old to get the loan
  3. You should be employed with your current organisation or running your business for a minimum 2-3 years
  4. You must be earning a stable income in order to repay the loan on a timely basis 
  5. Your credit score should be around 700-900 as it determines your interest rate and the loan processing time

What documents to furnish when applying for a mortgage loan?

The materials are more or less the same across the lenders. However, they vary if you are a salaried or business professional. They are:

  1. ID proofs (Aadhaar, PAN card, passport, driving license, voter’s ID)
  2. Address proofs (utility bills, ration card, driving license, passport)
  3. Employment proofs (employee ID, offer letter)
  4. Income proofs (pay slips, bank statement, form 16, bank statements)
  5. Business proofs (registration certificate, profit & loss account, partnership deed, office bills, tax audit reports)
  6. Income proofs for independent professionals (Income Tax Returns, bank statements)
  7. Property papers
  8. No Objection Certificate (NOC) if you co-own the property with someone

How does the loan against property interest rate works?

Mortgage loans are secured loans. You have to keep your property papers as collateral to acquire the loan. Precisely why the interest rates are lower, as low as the base rate. Now, loan against property interest rates are of 2 kinds:

  1. Fixed interest rate: The price remains the same throughout the tenure of the loan. However, many lenders levy different rates despite the borrower taking fixed-interest rate loan.
  2. Floating interest rate: Also known as variable rate, keep changing depending on the prevailing market conditions. It is beneficial for the borrower as the rates tend to go lower than the one they received the loan for.


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