Loan Against Property

In case you need a loan and have collateral to pledge, a great option to consider is a loan against property.

But what are loans against property? What are the features and benefits of these loans? 

Let’s find out.

What is a Loan Against Property?

Loan Against Property - Eligibility Criteria

The eligibility conditions imposed vary from one lender to another. However, your age, income, value of the property that is being put up as collateral, and your credit scores will matter the most.

Some of the common loan against property eligibility conditions are -

• The applicant must be at least 21 years old
• The borrower must be either salaried or self-employed.
• Additionally, you must receive the minimum salary or income as specified by your lender
• Applicants must also have an acceptable credit score, preferably 750 and above.

Loan Against Property - Documents Required

While documents needed to avail a loan against property will vary depending on the lender, here are some of the most important ones -

Documents Related to the Property in Question

• The title deed of the property
• Property tax paid receipts
• Documents such as Occupation Certificate, etc. for the property
• Insurance documents for the property
• Any other documents as decided by the lender in relation to the property

Other documents that may be required are

• Salary slips /Proof of Income
• Bank account statements
• Address proof
• Identity Proof of the individual
• Form 16/Income Tax Return

How To Apply For A Loan Against Property?

Here is how you can apply for a loan against land –

Offline: You can directly approach a bank of your choice and the lender will help you with the process, documents, and application.

Online: Fill out the application form on the lender’s website, upload all the relevant documents, and submit the form. The lender will contact and assist you further.

The approval for loans against property can take up to a few weeks as the lender has to verify all the factors, from the borrower's profile to the property. 

Once the documents are satisfactorily verified by the lender, a physical inspection of the property will also be carried out by the lender’s team to verify the physical condition of the property.

After the physical verification, the lender will put a value on the property based on the documents submitted, the physical condition of the property, market value, etc., and your loan amount will be sanctioned based on this.

Benefits of Loan Against Property

Take a look at some of the benefits of loans against property

• Borrowers can get loans at lower interest rates by pledging their property as collateral 
• LAP also comes with longer repayment terms, sometimes spanning decades, making repayment easier
• Certain lenders do not add prepayment charges to the loan as well making it all the more economical for you.

Features of Loans Against Property

Here are some of the salient features of a loan against property -

• Secured Loans

Since a loan against land is only provided against property as collateral, this loan is considered to be a secured loan

• Low Rates of Interest

As loans against property are secured, the interest rates imposed are on the lower side as compared to unsecured loans such as personal loans

• Longer Repayment Terms 

Loans against property come with repayment terms that can extend upto 25 years or so depending on the lending institution

• Retained Ownership

If you have pledged your asset for a loan against property, then the ownership of the said property will still be in your name even while you are repaying the loan

• Loan Pre-closure

Depending on the type of interest rate chosen (variable or fixed) you may have the option to pre-close your loan without having to pay a penalty. However, this will completely depend on the lending institution.

• Easily Accessible

As loans against property are secured, they can be availed quite easily without extensive verification processes or multiple documentation requirements

• Tax Benefits

Salaried applicants can enjoy tax benefits for a loan against property under Sec 24(B) if this loan is being used to fund their new house. However, if a loan against property is used for business purposes, the borrowers can claim tax benefits under Sec 37(1) of the Income Tax Act.

Factors Affecting Loan Against Property Interest Rates

EMIs are determined in large part by your interest rate, so getting loans with low-interest rates is the best way to manage this. Your interest rates are dependent on the factors given below -

Credit Score

Your credit score is the most important factor that determines your interest rate. With a high credit score, you can avail high amounts at lower interest rates. 

The Property to be Mortgaged

If your property is new, in an economically feasible area, and has good resale value, then you will be able to get a higher loan amount. Additionally, commercial properties will fetch a different rate as compared to residential properties. 

Loan Tenure

Longer repayment terms attract lower interest rates, but you will end up paying more over the course of the tenure. Therefore, opt for a shorter loan term and repay the loan as early as possible.

Your Profile

Another important factor that determines your loan interest rate is your profile such as your age, income, location, type of employment (salaried/self-employed), your credit history, repayment history, and more. 

A loan against property is a great option if you need a large amount of loan and have a property to put up as collateral. Since this loan is secured, the interest rates are relatively low and the loan takes time to be disbursed.

In the meantime, if you are looking for an urgent loan that does not require collateral and is disbursed within 24 hours of application approval, visit the moneyview website or download the app to apply for a personal loan now