It is a secured loan, where the borrower pledges the property as collateral against the loan amount.
LAP is a secured loan taken against an individual’s property. It is a loan offered by banks or non-banking financial companies (NBFCs). This loan is generally taken out for large expenses such as home renovations, business expansions, or investments. It is a popular form of mortgage loan available in India.
A loan against property (LAP) is a secured loan that banks, housing finance companies and NBFCs provide against residential or commercial property. These loans are usually offered at a lower interest rate as compared to a personal loan or business loan and are disbursed at a reasonable time. Anyone with a pre-owned property can avail such loans, whether they are salaried or self-employed in a business or professional setup. The quantum of loan sanctioned is also higher than what may be offered in other available options.
List of Documents Needed to Apply for a Loan Against Property
- Address Proof Your address proof is one of the most important documents required while availing of a loan against property. ...
- Identity Proof Along with your address proof, you need to submit your identity proof, including your PAN card, Aadhaar card, passport, or voter card. ...
- Income Proof ...
- Proof of Ownership of the Property to be Mortgaged
- Past Income Tax Returns
FAQ
Any loan against a residential or commercial property can be used for both personal and business purposes. In fact, you can use it for anything other than speculative or non-prohibitive activities.
Basically, the bank looks at your repayment capacity. For calculating the loan amount, your income, age, qualifications, number of dependants, spouse’s income, assets, liabilities, stability and continuity of occupation and savings history are taken into consideration. However, the eligibility of a loan does not, generally, exceed 60 percent of the market value of the property.
You can include your spouse as a co-applicant and that results in a higher amount being lent. However, if the property is co-owned, all co-owners mandatorily need to be co-applicants.
Processing fee for loan against any property varies from bank to bank and is generally around 1 percent.
Interest is calculated on a daily reducing balance. Your monthly outgo (equated monthly installment – EMI) is much lower as compared to the interest on annual reducing balance.
Loans against property have a maximum tenure of 15 years, subject to the condition it does not exceed your retirement age. This condition however can be flexible in certain cases
You repay the loan in Equated Monthly Installments (EMIs) comprising principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement.
Yes. Prepayment is possible and there is no prepayment fee if you repay the loan after six months of availing the loan if you pay from your own source of funds without transferring the loan.