There are so many different options when it comes to taking a loan in today’s time. While that is said, it must also be remembered that loans are primarily of two types, secured and unsecured loans. The first one defines loans that have collateral while the second one does not involve any collateral. Amongst the different types of secured loans, LAP or loan against property is a very common one. LAP is a kind of loan where a financial institution provides you with a loan against property documents.
What Exactly Does Loan Against Property Documents Mean?
Loan Against Property, abbreviated as LAP, as the name suggests is a loan taken with a property as the guarantee for the loan amount. When you take a loan against a property, it basically means that you are keeping the property mortgage in return for the loan amount. The loan is disbursed against the mortgage of the property. Generally, such loans involve a self-owned residential property. Although, you can also get a loan against a commercial property. As a matter of fact, the different types of properties with which you can avail a loan against property are:
- Self-owned residential property
- Self-owned commercial property
- A self-owned and self-occupied property
- Self-owned land
More importantly, it must be mentioned that HFCs NBFCs, as well as banks, prefer to provide LAP against residential properties only.
How Much Can You Get As The Loan Amount For A Property?
There can be a variety of reasons some opt for Loan Against Property. Whatever may be the reason, you would obviously be wondering about the loan amount you can secure with a LAP. When you are taking a loan against a particular property, the property itself serves as tangible collateral security. Therefore, the amount of money you will get as a loan against property will depend on the valuation of the property.
The existence of tangible collateral security with good market value means you get a good amount of money as a loan. This potential loan amount is decided before the loan is approved, based on the valuation of the property. Lenders generally offer 60% of the valuation of the property and the maximum loan tenure is generally 10 years.
Eligibility and Requirements For A Loan Against Property
Coming to the most important aspect of LAP, you must be looking to know about what you will need and what are the eligibility criteria to secure a loan against property. To begin with, banks, as well as non-banking financial companies, do not just look for collateral. They also inspect a range of other essential factors which include the loan applicant’s age, income and employment details, duration of employment, and a lot more.
The approval of a loan against property essentially depends upon the right loan against property documents. When applying for such a loan, preparing the documents required in an organized manner will help you get easy approval. Before we go into the documents required, let us discuss the eligibility criteria of a LAP.
Generally, such a loan can be availed by both salaried and self-employed professionals. The evaluation process of a LAP is pretty fast and simple. The eligibility criteria for a LAP obviously varies based upon the lender, there are a few common things that are inspected. They are:
- Applicant’s income
- Applicant’s savings
- Credit history and repayment track record
- The market value of the property
- Applicant’s employment status
- Financial stability
- Generally, the maximum age-at-maturity of a LAP for a salary-earning individual is 60 years.
What do you need to apply for a LAP?
- Proof of identity and residence (KYC)
- Proof of income
- Last 6 months bank statement
- Applicants’ photographs
- A cheque for the processing fee of the loan
- Employment documents (appointment letter, employment contract, etc.)
- Property evaluation report
- Form 16
- Properly filled up loan application form
Getting a loan against property documents is possible and can be pretty simple as well. Such loans are generally preferable over personal loans because they have a lesser interest rate and also a longer repayment tenure. Although, you must compare the rates and do some research to find the best rates and loan tenures. We understand that there’s a lot on your mind when taking a loan against property, but these are the basics that you need to keep in mind!