Who is Eligible for a Loan Against Property, and What Documents are Required?
Do you ever find yourself in need of funds to meet expenditures on education, marriage, healthcare, and various other domains? If so, in that situation, one of the best options you can opt for is to issue a Loan Against Property (LAP).
Continue reading to get a detailed explanation of LAP, its benefits, the LAP interest rates, and the LAP eligibility conditions.
What is a Loan Against Property?
- A LAP is a secured loan in which your property acts as collateral between you and the lender. The LAP is useful for both salaried individuals and businesses.
- Once you mortgage your residential or commercial property, the loan gets sanctioned, and the bank approves your credit amount, which is equivalent to the current value of your property as evaluated.
- The property you mortgage for the LAP can be self-occupied, rented, or any piece of land as long as the title to it is clear.
- The LAP can be used to fund medical emergencies, wedding ceremonies, vacations, school education, or expand your business.
What are the Advantages of Issuing a Loan Against Property?
Below are some of the features and benefits of issuing a LAP:
- Low interest rates
LAPs have interest rates compared to less secure methods such as personal loans, making them more appealing and affordable to the general public.
- Long Repayment Tenure
Loans secured by real estate have long repayment tenures, extending up to 15—18 years.
- LAP Eligibility
The eligibility criteria for LAP are quite lenient and simple to fulfill.
- Lower EMIs
Since the tenure of the LAP is longer, the EMIs also get lowered. Consequently, the loan burden on the borrower is reduced.
- Easy to Avail
LAP is simple to obtain because it is a type of secured loan, and banks are eager to extend credit to you. You can mortgage your property to your bank in exchange for a loan that you can use for business or personal purposes.
- No prepayment or foreclosure charges
Financial institutions allow individuals with floating Loan Against Payment interest rates to foreclose the loan or make partial pre-payments at no extra cost or prepayment penalty.
This leads to maximum savings and makes LAP an affordable option for the majority, provided the loan amount is not going to be used for business expansion.
Interest Rates on a Loan Against Property
Below is a standard floating LAP interest rate:
| Employment Type | Effective ROI (p.a) |
| Salaried Individual | 9.5% to 15% |
| Self-Employed Individual | 9.15% to 18% |
What are the Loan Against Property eligibility conditions?
The following are the LAP eligibility criteria:
- You should either be:
- An employee or
- A professional, self-employed, income tax assessee, or NRI (who owns real estate, whether residential or commercial, either in his own name or that of his spouse, children, parents, or siblings)
- You must earn at least Rs. 25000 per month (or Rs. 3 Lakhs per annum)
- The LAP should be liquidated before the eldest borrower reaches 70 years of age.
- While considering your eligibility for a LAP, various parameters are also taken into consideration, like property value, existing debt obligations, the stability of your business or employment, and your credit history.
- There must be an insurance policy for the property for which the LAP is being obtained.
What is the Procedure for Applying for a Loan Against Property?
You can apply for a LAP online by uploading your personal and professional details and filling out the online form.
Here is a list of documents required for applying for LAP:
| For Salaried Individuals | For residential proof, you’ll need a copy of:Ration CardElectoral Voter ID CardTelephone BillElectricity BillFor identity proof, you’ll need a copy of:Electoral Voter ID CardEmployer’s CardLatest passbook or bank statements in which you can show a salary or income being credited for the previous 6 monthsSalary slips for the previous six months that details all deductionsForm 16 for the previous two yearsAll the property documents for the property to be pledged for the loan |
| For Self-Employed Individuals | Certified financial statements for the previous 3 yearsFor residence proof, you’ll need a copy of:Ration CardVoter ID CardTelephone BillElectricity BillFor proof of identity, you’ll need a copy of one of the following:Voter ID CardEmployer’s CardLatest passbook or bank statement from where you can show your salary or income being credited for the previous 6 monthsAll the property documents for the property to be pledged for the loan |
(Additional documents might be required depending on individual applications).
Final Thoughts
All in all, LAPs are a secure and reliable method of offering your property in exchange for a loan. Not only are the LAP eligibility conditions lenient, but it also has low-interest rates, long repayment tenures, and no prepayment or foreclosure charges.
To understand more about LAPs, or to answer your doubts about the LAP eligibility conditions, you can consult help from financial experts like Piramal Finances. They provide efficient guidance and solutions for the needful people regarding finance matters.