Why Loan Against Property is a Hassle-Free Way to Meet the Cash Gaps

Why Loan Against Property is a Hassle-Free Way to Meet the Cash Gaps

Whether it be a wedding, an overseas vacation, higher education of your child, business expansion, or any other necessary expense, it may get intimidating to meet the need for funds. Through a Personal Loan from your bank or a Credit Card can come to your rescue, these are suitable options only if you need a small amount of money and are willing to serve a higher rate of interest.

If you own a property and are willing to offer it as collateral, then availing a Loan Against Property could be a better option for you. Read on to know about LAP as a credit product and why you should go for it.

Essentials of a Loan Against Property

A Loan Against Property is a secured loan offered by financial institutions against mortgage of a property. You can use this credit facility against your residential property as well as a commercial property, provided it is owned by you or any of the co-applicants. To avail a Loan Against Property, the proposed property must fulfill
certain criteria i.e.
– It should be a freehold property. A leasehold property is not acceptable.
– There should not be any open loan against the property.
– The property must be free from any encumbrances.
– The property should be located in an approved location.
– The property should not be involved in any court cases.

Features of a Loan Against Property

Maximum amount available: The maximum loan amount available is linked
to the value of the property. Different lenders follow different policies in this regard. For instance, the maximum amount available to you as a Loan against     Property from Bajaj Finserv is Rs. 3.5 crores while the maximum amount available as SBI Loan Against Property is Rs. 7.5 crores.

– Maximum repayment tenor:
The maximum repayment tenor for a Loan
Against Property can range from 5 years to 20 years, depending on the lender. For instance, in the case of Bajaj Finserv, the maximum tenor is 20 years, while in the case of HDFC Loan Against Property, it is 15 years.

– Interest rates:
As it is a secured facility, the interest rates for a Loan Against
Property is extremely attractive, starting from as low as 10.10% per annum.

– LTV Ratio:
The loan to value ratio in case of a Loan Against Property can go
up to 65%, i.e., you can get up to 65% of the market value of the property as a   loan.   For instance, HDFC Loan Against Property offers you an LTV ratio of up to   65%.

– Processing charges:
The processing charges applicable to a Loan Against           Property are usually ranging between 0.5% to 1% of the loan amount, depending upon the lender.

– Foreclosure charges:
There are generally no foreclosure charges applicable against the pre-payment of a secured loan availed on a floating rate structure.

– Usage:
You are free to use the money for any financial requirements, i.e., personal or business. You are not required to inform the lender regarding the end use of the money.

– Mode of disbursal:
A Loan Against Property can be availed as a term loan as well as an    overdraft facility according to your preferences.

Eligibility for LAP

Though the specifics might vary across lenders; generally in order to be eligible for a Loan Against Property, you need to satisfy the below-mentioned eligibility criteria:

– The minimum age of the applicant should be 21 years.
– The maximum age at the time of completion of repayment should be less than 70 years.
– If the applicant is self-employed, then the minimum work experience required is 3 years in    the same trade/ business.
– If the applicant is salaried, then the minimum work experience required is 2 years with 1 year in the same job.
– CIBIL score of 750+; though lower CIBIL score is also acceptable under certain circumstances.

Documents required for a Loan Against Property

In order to be eligible for a Loan Against Property, you must provide the following documents to the respective lender:

– For Self-employed applicants
o KYC Documents of all the applicants and co-applicants (PAN Card, Aadhar Card,        Passport, etc.)
o Proof of business registration and continuity.
o Income Tax Statements for the last 3 years with audited financials.
o GST Returns or VAT Returns for the last two years.
o Current Account statement and Savings Account statement for the last
12 months.
o Property documents (original) and property tax receipt
o Form 26 AS
o The repayment track record for loans availed.

– For Salaried applicants

o KYC Documents of all the applicants and co-applicants (PAN Card, Aadhar Card,         Passport, etc.)
o Salary slips for the last 3 months.
o Form 16 and Form 26 AS for the last two years.
o Bank Account Statement for the last six months showing credit of
salary.
o Loan repayment track
o Original property documents.

Why should you go for a Loan Against Property?

Following are some of the benefits of Loan Against Property that you should know about:

– High-value loan amounts of up to Rs. 10 crores can help you manage any sorts of financial problems that you are facing.

– You can continue to use the property as the lender will only create an equitable mortgage against it and not take the physical possession.

– The repayment period of up to 15 years allows you to repay the loan amount in convenient EMIs that you can afford.

– Attractive interest rates starting from 10.10% make it an extremely affordable option as compared to Personal Loans.

– Low processing charges ensure that there is no unnecessary strain on your finances.

– Nil foreclosure charges allow you the flexibility to pre-pay the loan as and when your financials allow.

Now that you have all the essential information about Loan Against Property, you
can now make an informed decision regarding its suitability for you.

Submitted by: SK

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