What is Loan Against Property?
Loan against property, as the name suggests, is applicable for individuals applying for a loan for purchase of a land/property, be it for commercial or residential interests. This comes off as a better option during times of financial crisis. Loan against property remains one of the most sought after loans in India, mainly due to the ever increasing real-estate prices.
A take-over of existing loan, with options of refinancing is also made available by most banks.
Characteristic of Loan Against Property
- A Secured Loan, it is offered only when the individual/applicant keeps the property with the bank as security. The loan interest rates are allocated based on the individual’s monthly salary, amount taken as loan, interest rates etc. Rate of interest of loans are again based on the customer’s profile (salary, credit history etc).
- Repayment periods are usually of the range of 10-15 years and hence are long-tenure loans.
- Minimum amount offered as loan is Rs 50,000/-
- The customer/applicant is also responsible for payment of charges towards administrative procedures while processing the application, along with the processing fee.
What purpose can one use loan against property funds for?
- Funding business and working capital needs of individuals, partnerships, private companies and SME's
- To purchase new property by pledging existing property
- As lower cost alternative to personal use and uses such as marriages, education, vacation, home renovation, medical emergency
Benefit of availing Loan Against Property (LAP) instead of other loans?
- As loan against property is secured against property, banks offer lower rate of interest compared to unsecured business loans or personal loans
- Loan tenure can be up to 18 years leading to lower EMI compared to unsecured loans where loan tenure can only be up to 5 years
- No additional collateral or guarantee is required
- Loan can be taken in name of company/ firm even if the property is owned in individual name of partners/ directors
How Ruloans can help you for Loan Against Property?
As one of the leading loan & finance based comparison portals in the country, RuLoans provides you with an unbiased platform to analyze and decide upon the available deals in the market.
Since banks follow strict procedures while lending loan for property, it is requested you be well versed with all the rules and regulations, for which, our Loan Calculator helps you to a great degree in understanding and comparing the various options and suggesting the most apt option for you.
With providing you details on status of your eligibility, amount you can borrow against the property as loan and terms & conditions (including the fine print), our Loan Calculators provide you with a comprehensive result to help ease your decision making process.
How is Loan Against Property Eligibility Calculated?
The loan amount that you can borrow against your property is calculated based on four factors:
- Market value of property – the approximate worth of the property that you are giving as security subject to eligibility criteria as described below. You may be eligible for a maximum of 75% of the value of the property.
- EMI that you can pay - the amount of money that you can pay every month towards loan repayment after meeting other expenses and paying your other EMI’s.
- Loan tenure - longer the loan tenure, higher the eligibility. Property loan tenure in India ranges from 5 years to 18 years.
- Interest rate - higher the rate of interest, lower the loan you will be eligible for.
Eligibility Criteria for Loan Against Property
The eligibility for Loan against property is determined by various factors including income, employment status, loan tenure and so on, and remains almost the same for professionals, self-employed professionals and businessmen.
- Any Indian citizen in good standing who is salaried, self-employed or business person with regular source of income can apply for a home loan.
- The applicant should be above the age of 24 years.
- Should be currently employed with existing organization or been involved in your business for a specific number of years
- Professional stability and savings history play a major role in approval of the loan, especially minimum required monthly salary and repaying capacity
- Bad credit history would prove to be a put-off, especially anytime within 3 months prior to applying for home loan. Hence, should have submitted EMIs for other loans on time, for the said amount of period.
How does the lending bank decide on the amount I can get as Loan Against Property?
The bank looks at your repayment capacity along with considering various other factors as income, age, spouse’s income, assets, liabilities etc and then calculates the loan amount. Usually the eligibility of the loan does not exceed 60% of the market value of the property under consideration.
Can there be a co-applicant for loan against property? If yes, who can be co-applicant?
It’s usually your spouse. But of the property is co-owned, all co-owners are co-applicants.
What are the processing fees for such a loan?
Usually around 1%.
What is the tenure of Loan Against Property?
Loans against property, though subject to not exceeding your retirement age, has a maximum tenure of 15 years. This condition is however flexible in certain cases.
How to repay my Loan Against Property?
Loans are repaid in the form of EMI (Equated Monthly Installments).
What security will I have to provide?
Mortgaging of your property is mainly the security provided in this type of loan. Collateral security in the form of assignment of insurance policy or any such other financial instruments are also required, as deemed necessary by the bank.
Can I repay the loan ahead of schedule?
Yes. Prepayment is possible and there is no prepayment fee if you repay the loan after six months of availing the loan. However, this should happen from your own source of funds without transferring the loan.
How is my loan reassessed if there is a change in status from Non-Resident Indian to Resident Indian?
A revised repayment schedule is worked out after the repayment capacity of the applicant is reassessed. The new rate will be applicable as per the then current rates of resident Indian loans and the revised rates will be applicable on the outstanding balance.
New Loan Against Property Rated as "Great!"
by 2 Users
Great team and easy delivery of loan is what I would say. The approval process was very clear and the Ruloan team and Axis bank personal loan team was really helpful towards us.
Review by Himanshu
Got a property loan of 2cr from Axis Bank.... Ruloans Guided me in the procedure. Axis bank support team also good.
Review by S.Sharadkumar