Who Is Eligible For Loan Against Property

When you need a quick loan for personal purposes, a personal loan is often the first option that comes to mind. However, getting a personal loan approved can be tough due to its strict eligibility criteria. Even if you get it, you’re under the constant stress of quick repayment to avoid a damaged credit score. But what if we told you there is a much easier and safer alternative to personal loans? 

Loans against property (LAP) are loans you get by keeping any property you own as collateral. Unlike personal loans, you can quickly get a large LAP with a long tenure and low-interest rate against any property! All you need to do is meet some simple loan against property eligibility criteria. Sounds interesting?

Keep reading to find all you need to know about loans against property, their advantages, and the loan against property eligibility criteria. Let’s begin!

What is LAP?

A Loan Against Property (LAP) is a loan approved against an asset called security or collateral. The collateral can be entirely constructed, freehold commercial, industrial, or residential properties.

Through LAP, you can raise funds for your various requirements at a low-interest rate. Your lender will never ask you how you have spent the money. Some typical applications of LAPs include:

• Financing your business
• Revamping your living space
• Addressing your financial requirements
• Any other personal needs

Notably, you cannot sell the collateral property during the loan tenure. Of course, you can use it during this duration, but the lender will have control over it.

Advantages Of A LAP Over A Personal Loan

If you own sufficient property and meet the loan against property eligibility criteria, a LAP should be your first choice to raise funds for your personal needs. Here are a few reasons why you should do so-

• LAPs have lower interest rates than personal loans, as they are less risky. If you default on a LAP, your lender will sell the collateral and recover the amount. 
• You can raise higher loan amounts in LAPs and for a longer tenure. While in a personal loan, the maximum amount you can raise ranges between Rs.15 -20 lakh. Besides, personal loans are short-term ones, so you need to repay them in a shorter period. Many times, it makes repayment painful.
• LAPs carry lower processing fees compared to personal loans. The processing fee is a one-time expense you must pay the lender along with your loan application. It’s a non-refundable charge that varies from one lender to another.
• You can raise funds through LAPs even if you have a low credit score as you’re pledging your property. But in the case of personal loans, meeting the loan against property eligibility criteria can be very challenging if your credit score is not so impressive.
• If you own a property, it’s easier to raise funds through LAPs than through personal loans. In a personal loan, the lender will assess your income level, current liabilities, credit score, etc., before extending the fund.
• Loans against property eligibility criteria are easier to meet as the lender takes less risk.

What Is The Maximum LAP You Can Get?

The maximum amount you can raise through a LAP depends upon the value of the collateral. But you won’t get a loan equivalent to the property’s value. Instead, it’ll be a percentage of the property’s value. Usually, this percentage (called the Loan-to-Value ratio) ranges between 40-75% of the property’s value, varying from one lender to another.

However, you must fulfil the loan against property eligibility criteria to get any amount of LAP. We will now discuss these eligibility criteria.

Who Can Take A Loan Against Property?

LAP is a better choice for loan seekers, but lenders extend it to only a few categories. The following categories of people meet the basic loan against property eligibility requirements to get a LAP:

• Salaried employees- Individuals working in private and public sectors can get a LAP.
• Self-employed individuals- A self-employed person filing Income Tax Returns (ITR) can get a LAP. Self-employed professionals like CA, doctors, lawyers, etc., also fall under this category.
• Small and Medium Enterprises- SMEs can pledge their industrial properties to get a LAP.

Other LAP Eligibility Criteria

Some other loans against property eligibility criteria can also impact your loan against property eligibility and interest rates depending on the lender’s policies. Let’s check them below:

• Profile of the applicant: The lender decides the interest rate of your LAP depending on your age, profession, and income. For instance, people nearer to retirement may need to pay higher loans against property interest rates. 
• Credit history of the applicant: Credit history plays a vital role in deciding the loan against property interest rates. So, you may find it hard to get a LAP if you have a history of loan defaulting or rejection of your loan applications.
• Loan tenure: If you apply for a loan with a longer term, chances are high that your lender will approve it. This is because the interest portion of a long-term loan is larger than that of a short-term loan.
• Loan amount: If you’re applying for a significant amount, opt for a long tenure. It improves your chance of getting approval and reduces the EMI burden. 
• Documents of the property: Before approving your loan request, the lender will verify the collateral records to ensure no legal loopholes.
• Records of ITR: If you’re self-employed, your ITR records play a crucial role in your loan against property eligibility. 

Documents Needed For A LAP

Along with the loan application, you must submit the following documents to get a LAP-

• Your identity proof
• Address proof
• Date of birth proof
• Proof of income
• Signature proof
• Copy of an audited financial statement (for SMEs and self-employed)
• Bank statement for the last six months
• ITR of last three years
• Form 16
• Documents of the pledged property

Summing Up

A LAP is a multipurpose loan to easily address fund requirements. And the benefits of low-interest rates, long tenors, and large sums make it an attractive option. However, to avoid hassles, you must check your eligibility and documentation before going for the loan.

You can also contact an experienced agency like Piramal Finance to get a LAP quickly and simply. The experts at Piramal will help you get the best deals, meet the loan against property eligibility criteria, and complete the entire application process from the comfort of your home!