What is Loan Against Property (LAP)?

                             LOAN AGAINST PROPERTY
                 Ø   What is Loan against property?
               A loan against property (LAP) implies a loan given or disbursed against the mortgage of property. The loan is given as a certain percentage of the property’s market value, usually around 40 per cent to 60 per cent.
        Loan against property belongs to the secured loan category where the borrower gives a guarantee by using his property as security.
     Ø  What purposes can I take a loan   against property for?
       Loan against Property can be taken for    following purposes:
  • Expanding your business
  • Getting your son/daughter married
  • Sending your son/daughter for higher studies abroad
  • Funding your dream vacation
  • Funding medical treatments
  • Project Financing
  • Working Capital
               Ø   What kind of properties can be mortgage for a loan?
 You can normally take a loan against your self-occupied or rented residential property. This could be a house or even a piece of land.
     Ø   What are the eligibility criteria to get a loan against property?
This criterion will vary from one bank to another. However, the common factors that all   banks look at are:
  • Your income, savings, debt obligations
  • Cost/value of the property mortgaged
  • Your repayment track record for other loans, credit cards, etc.
             Ø   What are the normal interest rates and tenure for repayment offered for a loan
                   against property?
Interest rates on loan against property range from 12 per cent to 15.75 per cent, and the loan tenure can be up to 15 years.
            Ø    How is a loan against property different from a personal loan?
 
 Loan Against Property
Personal Loan
The individual takes the loan by mortgaging the house property
An individual can take a personal loan for personal use without any security or guarantor

One of the cheapest retail loans after home loans; usually about 12%-16%

Higher interest rates compared to LAP; usually issued at interest rates in the range of 16%-21%
Since the rate of interest is lower, frequently LAP Equated Monthly Installments (EMI) turn out cheaper
Since rate of interest is high, Equated Monthly Installments (EMI) for personal loans are high
Maximum loan eligibility is determined primarily by the value of the property and income
Maximum loan eligibility is determined primarily by an individual’s income
Maximum loan tenure for LAP is up to 15 years (180 months)
Maximum loan tenure for personal loan is up to 5 years (60 months)
Secured loan
Unsecured loan

 

   Ø    What documents are required for applying for a loan against property?
Salaried person
         §    Application form with Photograph
         §  Identity and residence address Proof 
         §  Form 16 and latest salary slip
        §  Last six month bank statement 
        §  Processing fee charges
Self Employed professionals
§  Educational Qualification Certificate and Proof of Business Existence.
§  Last three years income tax returns, last three years balance sheets and profit and loss a/c.
§  Application form with photograph
§  Identity and residence address Proof
§  Last six month bank statement
§  Processing fee charges

 

Self Employed professionals
          §    Application form with Photograph
          §  Identity and residence address Proof
          §  Educational Qualification Certificate and Proof of Business Existence.
          §  Last three years income tax returns, last three years balance sheets and profit and loss a/c.
          §  Last six month bank statement.
      §  Processing fee charges.
Conclusion:
 A loan against property is one of the best ways to raise money. The only disadvantage of  such a loan is that if the borrower is not able to pay the loan fully, the bank or the financial institution can take possession of the mortgaged property.

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