A loan against property is one of the popular financial products among the host of loan options provided by financial institutions. Owing to its popularity, this market is predicted to reach $857.87 billion by FY26.
This financial tool typically features easy documentation, flexible repayments and lower interest rates. As the engagement around this financing rises, it is vital that prospective borrowers are aware of its essentials before knowing how to apply for a loan against property.
What is a loan against property?
A loan against property is secured financing offered by leading financial institutions against a commercial or residential property. Individuals owning a house can opt for this loan, whether they are self-employed or salaried.
Before deciding the loan amount and eligibility, lenders evaluate the property value. Subsequently, the loan amount will depend upon the prevailing market value of the property. Remember that financial institutions generally disburse 75-90% of the property’s value, which is known as the LTV (loan to value) ratio.
Advantages of opting for a loan against property
The demand for LAP is constantly increasing due to the following reasons:
- The disbursed loan amount comes with no end-use restrictions. This means that a borrower can use this amount to meet a host of personal expenses.
- The loan quantum is usually high, which can be used to meet all big-ticket financial obligations.
- This financing comes with a higher loan tenor, resulting in lower EMIs and overall loan affordability. However, if you want to save significantly on EMIs, you can also opt for a loan against property balance transfer. This facility allows you to transfer your existing loan account to a new lender, promising a lower interest rate. It helps individuals save substantially on EMIs and lower interest costs, thus decreasing the debt burden.
- A loan against property can be obtained by both salaried as well as self-employed borrowers.
- A borrower is eligible to occupy his/her property even after the loan is taken.
Along with various benefits, this financing tool also entails some crucial things that borrowers must be aware of. For instance, before approving a loan application, lenders usually assess the eligibility of borrowers.
Determining the eligibility depends upon various factors. So, before moving ahead with how to apply for a loan against property, let us detail the eligibility parameters that borrowers consider.
Loan against property eligibility criteria
Prospective borrowers must meet the following parameters before taking a loan against property:
Salaried individuals:
- Must be an Indian citizen residing in India
- Applicant’s age must be between 28 and 58 years
- Must be salaried at a recognised public or private limited company or an MNC with a minimum work experience of 3 years.
Self-employed individuals:
- Applicant must be an Indian citizen residing in the country
- Age of the borrower must be between 25 and 70 years
- Must provide a steady income source
Upon meeting these eligibility requirements, several leading financial institutions extend attractive pre-approved offers to existing customers. These offers help in simplifying the application procedure. They are available across varied financial instruments, including a loan against property and home loan. You can check your pre-approved offer within seconds by entering your name and contact details.
Documents required for loan against property
Mentioned below is the list of essential documents that an applicant must submit while availing a loan against property-
For salaried applicants:
- Recent salary slips
- Previous 3 months’ bank account statement
- Aadhaar card/PAN card
- Proof of address
- Property documents
- IT returns
For self-employed applicants:
- Previous 6 months’ bank account statement
- Aadhaar card/PAN card
- Proof of address
- Property documents
Applicants must note that the list of documents is indicative. A lender may even ask for additional documents when you apply for this loan.
Things to consider before taking a loan against property
Before knowing how to apply for a loan against property, borrowers must be well-versed with a few things. Here are a few aspects to check out before taking a LAP:
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Repayment capacity
Borrowers need to assess their repayment capacity before borrowing. Regarding this, a loan against property EMI calculator can be helpful. This online tool helps in computing the monthly instalments by considering the loan amount and repayment tenor. You can alter the fields until you arrive at an amount that you are comfortable repaying.
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Know the eligibility criteria
Loan eligibility may vary from lender to lender. However, borrowers must understand the eligibility criteria to eliminate possible chances of loan application rejection.
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Compare interest rates
Borrowers need to compare interest rates different lenders offer to arrive at a financial institution that provides the lowest LAP interest rate.
To make an informed borrowing decision, keep these factors in mind. Also, know the advantages of availing this financing before learning how to apply for a loan against property.
