Who is Eligible for Loan Against Property and What are the Documents Required

A loan against property (LAP) is a type of secured loan. It allows you to use your property as collateral to borrow a lump sum of money. The loan amount is usually a percentage of the property’s value.

It is typically used for debt consolidation, business expansion, or other large investments. However, there are a few loans against property eligibility criteria that you must meet to apply for this credit.

To be eligible for a loan against property, you must also have certain documents. The eligibility criteria and documents required vary from lender to lender. Generally, you will need to be at least 21 years old, have a regular income, and own a property in India to use as collateral. 

Keep reading to learn more about the loan against property eligibility and what documents are required.

What are the eligibility criteria for a loan against property?

The amount you can derive from a loan against property is determined by the value of your property. You can also use the loan for any personal or business purpose. 

You can choose to repay the loan in EMIs over some time, depending on the loan tenure. To be eligible for a loan against property, you must meet the following criteria:

• You must be a resident of India.
• You must be between 21 and 65 years of age.
• You should be the rightful owner of the property that you offer as collateral.
• You should have a regular source of income and should either be a salaried employee or self-employed.
• You must have earned a minimum gross annual income (GAI) of INR 3 lakhs in the previous three years.
• Your CIBIL score must be 700 or above.

What are the documents needed to apply for a loan against property?

When you apply for a loan against property, you must keep the following documents on hand. This will help you take advantage of lower mortgage loan interest rates, along with other benefits.

The documents you will need to furnish to the lender will depend on your status. This is why we have sections for different use cases.

The documents that you will need are as follows:

1. If you are a salaried employee

Proof of identity (any one)

• PAN Card
• Passport
• Driving Licence
• Voter’s ID Card
• Aadhaar Card
• Ration Card

Proof of Address (any one)

• Aadhaar Card
• Voter’s ID Card
• Passport
• A utility bill (such as telephone, electricity, water, or gas bills), which is less than 2 months old
• Bank account statement
• LIC Policy

Proof of Residence Ownership (any one)

• Documents related to the property
• Maintenance Bill
• Electricity Bill

Proof of Income (any one)

• Payslip for the last two months
• IT Returns for the last 3 years
• Form 16
• Promotion or increment letter, if any

Proof of Job Continuity (any one)

• Current job appointment letter, in case you have spent more than 2 years in the same organisation
• Current employment certificate
• Certificate of experience

Others

• Bank statements of your salary account for the last 6 months
• Documents of any existing loans, such as sanction letters and payment records
• Any proof of investment, such as fixed deposits, fixed assets, shares, etc.
• Copies of property documents, such as the sales deed, copy of the agreement, share certificate, latest maintenance bill, etc.
• Advance processing cheque, for processing of the loan documents

2. If you are self-employed or a businessman

Proof of identity (any one)

• PAN Card
• Passport
• Driving Licence
• Voter’s ID Card
• Aadhaar Card
• Ration Card

Proof of Address (any one)

• Aadhaar Card
• Voter’s ID Card
• Passport
• A utility bill (such as telephone, electricity, water, or gas bills), which is less than two months old
• Bank account statement
• LIC Policy

Proof of Residence Ownership (any one)

• Property documentation
• Electricity Bill
• Maintenance Bill

Proof of Business Ownership and Address (any one)

• Property documentation
• Maintenance Bill
• Electricity Bill

Proof of business existence (any one)

• Sales Deed or Agreement
• Saral IT Copy (three years old)
• Copy of Tax Registration
• Company registration licence

Proof of Income (any one)

• IT returns of the last three years
• Computation of income duty. It should have had due attestation by a chartered accountant
• Audited balance sheet
• Profit and Loss Accounts that include tax audit reports
• Form 16 

Others

• Bank statements of your savings and current accounts. They should be for the last year.
• Documents for any existing loans. These include sanction letters and payment track records.
• Any proof of investment. They could be fixed deposits, fixed assets, shares, etc. 
• Copies of property documents. They could be documents such as a sales deed, or a copy of the agreement. Also, share the certificate, the latest maintenance bill, etc.
• Advance processing cheque. It is needed for processing the loan documents for sanction.
• Passport-sized photograph.
• A professional degree certificate. It is needed if you are a professional. 

What are some of the benefits of a loan against property?

Applying for a loan against property can be very beneficial for you. Some of the benefits that you can enjoy include:

Lower rate of interest

The loan against property interest rates is lower than personal loans. This is because this loan uses your property as collateral. 

Lower prepayment charges

A loan against property also has low to zero prepayment charges. So, you can close your loan easily. 

Easily accessible

You can easily get a loan from a bank if you meet the loan against property eligibility criteria. 

Lower EMI

This loan also has a lower EMI. It is in addition to a low mortgage loan interest rate. A loan against property is available for a longer tenure. So its EMIs are lower than those of personal loans.

Longer tenure

A loan against property is available for a longer tenure. It can go up to 15 years in some cases.

The final word

Applying for a loan against property can be stressful if the process is unknown or the applicant does not have an idea of the documents required. It is always best to check your loan against property eligibility first, followed by gathering the documents that you would require. For more information and guidance on loans against property, you can visit Piramal Finance.