Loan against property (LAP) is the best option for loan as compared to other loans. For financial assistance banks provide various types of loan.
Individuals choose the type of loan according to the requirement like education Loan, vehicle loan & housing loan etc.
There
is one such loan known as Loan against
property (LAP). It is the most popular type of loan then personal loan.
The
most important benefits of Loan against property (LAP) are that the fund can be
used for any purpose. It has its own terms & conditions and has its own
benefits.
If
you think about how to get loan against
property and what are the documents required and other rules for apply for
a loan.
We
explain you in detail about the following:
What is Loan against property?
Loan
against property is a type of loan in which you will get a loan by mortgaging
your property. Property can be
residential or commercial.
Loan
can be availed by mortgage of residential property as well as commercial
property. Commercial property means like if you have a shop then you can simply
mortgage it and take loan against property (LAP).
Loan against property is a
better option as compared to a personal loan, because in LAP you can take a
large amount of loan at lower interest simply by mortgaging a property of
higher value.
Moreover
this loan gives you the flexibility of end use i.e. you can use the fund for
any purpose say on children education, medical expense, buying a house etc.
It
is a type of secured loan.
What are the eligibility criteria of Loan against property?
Every
bank offers different terms & conditions for loan against property.
But
here are some of the common points which defined that you are eligible for
taking loan against property or not:
- Borrower must be citizen of a country.
- You have to submit required documents to the bank or NBFC.
- While giving you a loan, financial institution checks cibil score / credit score. If the credit score is better then you will get a loan easily.
- If you have any existing loan then your continuity of loan repayment is also referred to before giving Loan.
- You must own a property whether residential or commercial for the purpose of mortgage of loan.
- You have to submit collateral security in some types of loan.
- After verifying your loan repayment capacity banks offer you the loan against property.
- Both salaried as well as self-employed can apply for loan against property.
- Property against which you are taking a loan must be approved by the bank.
- You can add any co-applicant/ co-borrower it will help you get a large amount of loan.
How to get or apply for loan against property (LAP)?
If
you are meeting the loan against
property eligibility criterion then you can apply for loan.
You
can simply approach the bank for taking out a loan and ask for the terms &
conditions.
Because
every bank offers different terms & conditions for loan in fact there is
different document requirement for salaried and self-employed person.
So
you need to check the bank which gives your better offer and which is
beneficial for you.
Every
bank decides the interest rate
according to your loan required amount as well as your property value.
If
your loan application is accepted then the bank demands certain documents and
then the sanction process starts.
Every
bank charges some processing charges at the time of loan application. After
that some other charges like documentation
charges, inspection charges, legal fees, cibil charges etc.
The
amount of charges varies from bank to bank. It is a very nominal charge which
is like some percentage of sanction
amount, so before taking a loan consult with your bank all the terms
& conditions.
After
completing the documentation, verifying your loan repayment capacity of the
individual bank grants you the loan against property.
What are the documents required for Loan against property (LAP)?
Document
required may vary from bank to bank but some common documents required are
given below:
Documents required for salaried employed:
- Application form (duly signed).
- Original Property documents.
- Income tax returns (ITR) for last 3 years.
- Salary slips of the last 3 months.
- Proof of identification (PAN Card / Passport / Voter ID etc.).
- Residential proof.
- Bank statements of the last 6 months.
- Proof of Job experience.
- Details of existing loans (if any).
Document requirement from self-employed individuals
- Application form (duly signed).
- Original documents of property.
- Income tax returns (ITR) for the
- last 3 years.
- Financial statements.
- Proof of identification (PAN Card / Passport / Voter ID etc.).
- Residential proof.
- Bank statements for last 6 months.
- Details of existing loans if any.
- In case of professional – a degree certificates required.
- Proof of existence of business.
What are the benefits of loan against property(LAP)?
Residential or commercial property
Loan
against property provides against residential
property as well as commercial property.
If
an individual has shops, office building or even a self-occupied house then can
avail loan.
Moreover
this loan can also be availed against a plot
of land.
Income Tax benefits (In India)
Loan
against property also provides various Income Tax benefits.
If
you have used a loan amount for construction of home then you can get benefit
of deduction on interest paid on loan under section 24 of Income Tax act, 1961 under the
head House property and this can be maximum rupees 2 Lakhs.
Under
section 37 of Income Tax Act, 1961 you can get tax benefits of Interest paid on
Loans against property.
Lower Interest rate
Interest
rate of Loan against property is lower than the other loans prevail in the
market.
Bank
decides the interest rate based on your loan sanction amount, value of
property, your creditworthiness,
checking cibil score etc.
If
your credit score is good you may get a loan at a lower rate of Interest.
Simple process
It
is very simple to take a loan against
property (LAP). You need to have a property which will be mortgaged for a
loan. It does not carry the complex process.
Prepayment charges
If
you pay your full outstanding loan
before the due date then certain prepayment charges will be charged.
But
in case of individual borrowers who have a floatation
rate of interest then a relaxation is given by RBI that in such case there
would be no prepayment charges.
Flexible
This
loan is more flexible than other loans, you can use the fund for any purpose
i.e. children’s education, purchase of house, medical purpose etc.
Moreover,
the tenure of this loan is very flexible. Maximum tenure is 20 years. You can
increase the tenure resulting in lower
EMI but have to pay more interest for a long period.
Conclusion
Loan
against property (LAP) is very beneficial for those who are an owner of
property and they want loan for financial assistance.
They
can simply put their property on mortgage and take the loan. Terms and
conditions of this loan vary from bank to bank. Now you completely know how to
get a loan against property and how it works.
So before taking this loan consult all the requirements of this loan with your bank and take the best benefit out of it.
Topics you may be interested: