Whether you’re looking for credit to meet unexpected personal needs or fund your business expansion, getting a loan is the best decision.
Financial institutions offer multiple loan products depending on your requirements so that you can keep your savings for a rainy day. A loan against property (LAP) stands out, particularly as the most secured form of a loan with affordable interest rates.
What is LAP?
A loan against property is a secured loan that you can use for both personal and business purposes. You can pledge any commercial or residential property in your name as collateral even while you’re occupying it. Moreover, a loan against property has zero usage restrictions, which means you can use it to finance a variety of purposes like a wedding, a medical emergency, your child’s education, business expansion, family vacation, and much more. The property pledged as the security returns back to the owner once the loan has been repaid.
But before you proceed with your LAP application, make sure your property is legal and has all relevant government approvals. No financial institution will accept property built on illegal land as a mortgage.
Now, many people often confuse LAP with home loans. But the meaning of a LAP Loan and a home loan is different, and they serve different purposes.
What is LAP in a home loan?
You can take a home loan only for constructing or buying a house. At the same time, you can use a loan taken against property to fund any personal or business requirements. Although you can avail of LAP to buy a house as well, its interest rates are usually higher than home loans.
Besides, you can enjoy tax deductions for home loans, but for LAP, you can only receive tax exemptions for business purposes.
As you can see, LAP loans are ideal for both personal and business requirements, making them an excellent option for meeting financial emergencies. To better understand “what is LAP loan”, read on.
Eligibility required for Loan Against Property
To qualify for a loan against property, you must meet the following eligibility criteria:
- – Your age must be between 25 and 65 years
- – Your collateral property must be located in India
- – You must possess all legal and property-related documents
- – You must have a minimum income of Rs. 25,000 p.m. from a job or business
Documents required for LAP
To apply for a loan against property, you must produce the following documents:
- – Identity proof (passport, driving license, Aadhar card, or Voter ID)
- – Address proof (utility bills or rental agreement)
- – Income proof (salary slips, bank statements, or income tax returns)
- – Property ownership documents (property tax receipts, deed of sale, or no objection certificate)
- – Bank statements for the last 6 months
How to Apply for Loan Against Property
You can easily apply for a loan against property online by following these steps:
- Step 1: Visit the official website of your preferred lender and navigate to the ‘Loan Against Property’ section.
- Step 2: Check your eligibility and click on ‘Apply Now.’
- Step 3: Fill out the online application form with your personal and property details.
- Step 4: Upload the LAP required documents and click on ‘Submit.’
The lender will review your loan application and verify the property documents to determine if you meet the eligibility criteria and if the property is free of any legal disputes. If they are satisfied, they will approve your loan request and send the loan agreement outlining the terms and conditions of the loan.
Advantages of a LAP loan
The meaning of a Lap Loan and what it comprises can be better understood by what it brings to the table. Here are some benefits to taking out a loan against property:
Low rate of interest
While applying for a loan against property, interest rates are usually lower as compared to unsecured loans. As a result, you pay lower EMIs, which reduces your financial burden. Besides, the loan against property interest rate depends on factors like the value of the property, loan amount, your credit score, etc.
Longer repayment tenure
A loan taken against property can have a repayment tenure of up to 15 years. This means you can opt for longer loan tenure to reduce your EMIs. However, remember that longer repayment tenures also attract higher interest rates. You can use a loan against property EMI calculator to calculate your potential EMIs for the tenure you desire and choose accordingly.
Larger loan amount
Financial institutions will lend you a loan amount of up to 50-70 per cent of your property’s existing market value. Therefore, if you own a high-value property, you will be able to borrow a large amount of money against it.
A quick application process
Taking out a Loan against property is a fairly straightforward process, requiring much less time as compared to the alternatives. As LAP is a secured form of loan, lenders usually don’t follow a strict eligibility criterion to gauge your loan suitability. This means you can quickly get the loan at an affordable LAP rate.
To sum up
It is best to avoid dipping into your savings when financial needs can be met elsewhere. Your real estate investments can become a safety net during times of financial crisis. So, if you’re ever in need of quick funds, take out a LAP. It is a much safer option as compared to other alternatives. In case you have already taken a loan elsewhere, you can transfer the outstanding loan balance to a LAP by contacting your financial institution and taking advantage of the benefits that come with it.
With Tata Capital, you can get a loan to fund your requirements at affordable LAP rates and minimal documentation. Use our loan against property EMI calculator to understand your potential EMIs.
FAQs
The amount of loan you can get against your property typically depends on the property's value and the lender's policy. Typically, lenders offer up to 50-70% of the property's market value as a loan.
Most lenders require a minimum CIBIL score of 650 to 700 to approve a loan against property. A higher score improves your chances of getting the loan at favourable terms, including lower interest rates.
Obtaining a loan against property without income proof can be difficult as lenders typically require proof of your repayment ability. However, some lenders may consider other factors such as the property's value, your credit score, and alternative income sources to determine your eligibility.
It can be challenging for an unemployed person to get a loan against property. However, lenders might consider your application if you have a co-applicant with a steady income or substantial assets.
Yes, a housewife can apply for a loan against property if she owns the property and can provide a co-applicant or guarantor with a steady income.
03 December 2024
5 mins read
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