All you want to know about Loan Against Property (LAP) is explained well in this post. Our loan experts have prepared an exhaustive set of information at one page. This will help you understand the loan against property better.
What is a loan against property?
A loan which is sanctioned against the mortgage of a property is called loan against property. The property may be residential or commercial both. You may use the LAP amount for all types of business or individual purposes. The loan is disbursed usually from 40% to 70% of the market value of your property. LAP is better loan option for you when compared to personal loan or other higher interest rate loan. The lenders also feel secure for their debt amount given to you as they have mortgaged the assets higher than the value of loan amount.
Following are the factors responsible for loan against property:
- Monthly/Annual income slab
- Age of applicants
- Qualification of applicant
- Liabilities like other loan or debt
- Income of Spouse
- Repayment Capacity for EMIs
- KYC documents
- CIBIL Score
All the KYC (Know your Customer) documents like your PAN, Adhar, Bank Statement, Income Proof, Address Proof will be required. The property papers against which loan is mortgaged is special requirement. You should provide the complete chain of property papers as they are important for evaluation of current market price of the property. The witness and guarantee is also required by many of the lenders.
Mortgage of property
The property against which you want to avail the LAP should be free hold. The property may be residential, commercial or industrial. Please do ensure that the title deed of the property is clear. It should be marketable as well. The property should also not have any stay order of court, litigation, existing mortgage or other loan. The lender will consider only safe and secure property which he could en-cash in future if you fail to repay the loan.
Interest Rate and Loan Tenure
Rate of interest offered on LAP by public bank and private lenders is generally 9.75% to 10.50%. LAP is given on reducing rate of interest. It gives you the benefit when calculated with the annual interest balance paid to lender.
LAP is given to you for a maximum of 15 years of period. You may avail LAP as per your repayment capacity and repay the amount. Your monthly EMI shall decide the loan repayment tenure. You may also repay the loan in advance. We call it prepayment or foreclosure of your loan.
In near future when you are in need of urgent money, you may mortgage your property and avail the LAP now. The lower interest rate and EMI will help you to repay it in easy installment. Our loan experts advise you to take LAP instead of personal loan for the amount above than 2 Lakh. The logic behind is lower interest and longer tenure to repay. Before you finalize the loan deal, do compare the processing fees, market value of your asset/property, interest rate, penalty for default of EMIs and other similar aspect which may decide your over all loan eligibility.