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What is Loan Against Property

The term Loan against Property refers to a mortgage loan, which you can avail by pledging your property as security or collateral. Such a loan can be availed by an individual, or a business, against existing property as collateral. The mortgage property could be your home, land, industrial building, shop, or any other kind of landed estate. Most banks and NBFCs offer loans against property as multi-purpose secured loans. You can obtain funds of up to 60% to 80% of the market value of your property.

Loans against property typically offered at lower interest rates as compared to personal loans or business loans and disbursed within a reasonable period. The fact that you mortgage your property does not mean that you don't own your property. In fact, you may continue to use the mortgaged property for residential or commercial purposes. When you apply for a loan against property, you are required to meet several requirements, including minimum credit scores, and down payments. Your application then goes through a rigorous screen process before approval and disbursal.

Why you should opt for Loan Against Property

A loan against property allows you to manage your cash flows effectively, since the costs of borrowing are minimal. The loan backed by collateral has cheaper implications, making such kind of funds economical to borrow. Being multi-purpose borrowings there are no restrictions on end-usage, which gives you the advantage of flexibility, backed by low interest rates.


Benefits of a Mortgage Loan

  • Lower Rate of Interest

    Loans against property are secured loans, where you pledge your property as security against non-payment or default. The risk being considerably lowered due to the collateral, the rate of interest you are offered will be lower than most personal loans.

  • Low or No Prepayment Penalties

    Most banks and NBFCs prefer not to charge prepayment penalties on loans against property when you consider to close your loan against property by prepaying your loan before the term of your loan ends.

  • Longer Tenure

    Most banks and NBFCs offer loans against property for longer tenures than the tenures offered for personal loans. LAP tenure could go up to 15 years, compared to personal loans that are offered for up to 7 years.

  • Lower Equated Monthly Instalment

    A loan tenure has an inverse relationship with Equated Monthly Instalments, in the sense that shorter the period of the loan, higher the EMI, and longer the loan tenure, lower the EMI. That also means, larger the interest outgoings on a longer period loan, and lesser the interest outgoings on a short period LAP.

  • Easy to Availability

    Loans against property are secured loans, which are secured by collateral, and as such are lower risk loans, and hence most banks and NBFCs are more than willing to provide loans against property, hassle-free.

Eligibility Criteria

Eligibility Criteria for Mortgage Loan

  • You need to be a Citizen of India
  • Good Savings History, and Professional Stability
  • Good Credit History
  • Steady and healthy banking relationship
  • Ownership and Clear Title of Property

How much loan can I get against a property?

You can avail a Loan against property to the tune of 60% to 80% of the market value of your property. However, the maximum amount you can avail as a LAP depends on your employment status.

  • Salaried Person

    As a salaried person, you can avail a loan against property to the tune of 60 times your net monthly income. The lender pegs your limit of borrowing at Rs. 1 Crore.

  • Self Employed Person

    Generally lenders can advance you a sum of Rs. 3.5 Crore if you are a self employed person with verified credentials.


List of Documents required for LAP

When you apply for a LAP, you need to submit documents as proof of your eligibility for approval. Unlike other loans, you don't need to submit income proof. Here's a generic list of required documents for a loan against property.

Salaried Person

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    Application Form

    Filled and signed Application Form

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    Passport-Size Photographs

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    Identity Proof

    • Aadhaar Card
    • PAN
    • Voter ID
    • Passport
    • Driving License
    • Employee ID (For Government Employees)
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    Cheque to cover Administrative and Processing Fees

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    Proof of Address

    • Rent Agreements
    • Bank Statements
    • Ration Card
    • Passport
    • Driving License
    • Bills
    • Water
    • Telephone
    • Credit Card
    • Electricity
    • Property Tax
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    Proof of Age

    • Birth Certificate
    • Passport
    • Receipt of LIC Policy
    • Pension Payment Order
    • Receipt of LIC Policy
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    Additional Mortgage Loan Documents List

    • Salary Slips of the past 3 months
    • Form 16
    • 6 Months Bank Statements
    • Details of Existing Loans
    • Property Papers
      • CC
      • OC

Tenure of Loan Against Property

A loan against property can be used for many purposes including big-ticket expenses.

  • Business Expansion
  • Working Capital
  • Emergency Medical Treatment
  • Renovation
  • Home Purchases
  • Weddings
  • Overseas Education
  • Debt Consolidation

You can avail a loan against property for a period of up to 15 years.