A guide to understanding loan against property

Today, people are more flexible when it comes to taking a loan as a solution to fulfill personal or professional requirements. Today, you can find a tailor made loan which perfectly suits you. While there are so many types of loans that you are aware of, did you know about loan against property (LAP). Let’s find out what’s a LAP;

What Is Loan Against Property?

  • LAP is a loan granted against the property value either owned by the applicant or his guarantor which is typically parents. This property is then mortgaged and the papers will remain with the bank/NBFC until the loan is repaid.

Features of a Mortgage Loan:

  • A loan against property is a secured loan and is granted against a property which is an immovable asset. The purpose of getting a loan like LAP can be for both; personal finances or business funding etc.
  • You can mortgage vacant plots of land and rented properties too.
  • The maximum amount disbursed you can get against the property via LAP is between 60-80%. This is derived via the loan to value ratio.
  • Since this is a secured loan, the interest rates are low. Also, being a secured loan, the risk of defaulting is very less.
  • Banks/NBFC’s allow a longer tenure for loans against property which can go up to 15 years.

Eligibility for LAP:

Apart from the main criteria of having the property under the applicant’s name, you need to fulfill the below criteria;

  • Minimum age between 23-25 and maximum of 65-70 to repay the loan.
  • Financial status must be sound. Your income must be good for you to get a good rate and a higher loan amount.
  • Your credit score will also determine how much of a loan you can get.

Benefits of a Loan against Property:

  • The best benefit of a LAP is that you can use your property to get a loan without transferring its ownership.
  • The interest rates in LAP are much lower than personal and business loans.
  • If the value of the property is substantial, you can get a higher amount of loan. That is not possible in personal loans as your income determines the final loan amount.
  • In LAP, you can repay the loan with a longer tenure. This is not possible in personal loans.

Points of Caution:

  • If the property is in the name of more than one individual, all individuals would have to act as joint borrowers or co-applicants.
  • You also need to keep in mind that lenders will factor in the market value of the property, its age and overall condition before fixing the loan amount.
  • If the said property is mortgaged under the loan, you cannot sell it off before paying off the current outstanding loan.
  • Always repay your loan in time because in case of defaults in repayment of the loan, the lender has the right to confiscate your property, sell it and realize the outstanding loan subject to the authorized jurisdiction.

Weighing Your Options:

Holding your property as mortgage is a big decision and hence it is wise to weigh

Your options right from the choice of lenders to the loan value, the interest rates and EMI etc. After thorough research you will get the best offer as per your requirements.

To find out more about how much loan you can against your property, Click Here

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