Loan Against Property: Interest Rates, Eligibility Criteria and Documents Required
A Loan Against Property (LAP) is a secured loan that can be availed of against the asset pledged as collateral. The asset could be your land, house or commercial premises. The loan is sanctioned based on the current value of the property. The property remains as collateral until the loan is repaid. Because of its flexibility in terms of usage (you could use LAP amount to fund any financial requirement), over the years, LAP has become a preferred option for debt consolidation.
Before learning more about loan against property and its eligibility criteria, let’s look at some of its features.
Features of Loan Against Property
The following are some of the key aspects to remember when looking for a loan against property:
- A loan against property is a secured line of credit. Your immovable property or house is the collateral against the sum that your lender offers as an advance.
- In case of non-payment of dues, a lending institution can sell the pledged property to recover its losses.
- Due to its secured nature, the loan against property eligibility criteria is easy to meet. Interest rates are nominal as well.
- Lenders calculate the maximum loan principal by calculating your home’s current market value. Even so, only a portion of this value is available as a loan.
- You need to provide property documents required for a mortgage loan to avail this type of credit.
- A loan against property is free from end-use restrictions. Therefore, you can use the principal amount to fund any need without interference from your lender.
Loan Against Property Interest Rates (2023)
Refer to the table below for loan against property interest rates:
| Banks/NBFCs | Interest Rate (p.a.) |
| Navi Home Loan | 8.39% onward |
| HDFC Ltd. | 8.4% onward |
| State Bank of India | 8.50% onward |
| Axis Bank | 8.60% onward |
| Kotak Mahindra | 8.40% onward |
| IIFL | 8.40% onward |
| Tata Capital | 8.60% onward |
| IDFC FIRST | 8.45% onward |
Please note tat the above table is for educational purposes only. The rates could change at the sole discretion of the bank.
Steps to Apply for Loan Against Property
Loan against property or mortgage loan is a popular loan method among the borrowers. The process to apply for a loan against property is as follows:
- Step 1:
There are many banking and non-banking financial institutions providing loans against property. You have to do your research carefully and choose from them as suitable for your criteria.
- Step 2:
Then, you should find out the market value of your property to find out how much loan you avail of against the property.
- Step 3:
Once you have zeroed down the lender, check their eligibility criteria and also the required documents you have to submit for the loan application to process.
- Step 4:
If you meet the eligibility criteria, go to the website and fill out the loan application form. Submit the form along with the required documents. If you want to apply online, you have to visit the nearest office of the lender and submit the form along with the documents.
Documents Required for Loan Against Property
1. For salaried
You will need to furnish the following mortgage loan documents if you are a salaried employee:
- Address proof
- Income Tax returns
- All documents related to the mortgaged property
- PAN Card
- Identity proof
- Bank account statements for the previous three months
- Salary slips
- Property documents
2. For self-employed
If you own a business, you need to submit the following documents:
- Address proof
- Identity proof
- All relevant documents of the mortgaged property
- Form 60 or PAN card
- Bank account statements for the previous 6 months
- Property documents
- Financial statements
- IT returns
Keep in mind that these are the basic documents necessary to avail of LAP or Loan Against Property. Also note, some financial institutions may ask for additional paperwork.
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Fees and Charges Associated With Loan Against Property
A loan against property has more than the principal amount involved when it comes to sanctioning and repayment. The following are the fees and charges associated with loan against property. These might vary depending on the loan amount and bank or financial institution.
1. Interest rate
Interests are paid with the principal amount on a monthly basis. In the initial stage of repayment, the EMIs mostly include the interest which is gradually decreased and the EMIs during the final stages of tenure mostly consist of the principal loan amount. The borrowers can choose from a fixed or floating rate of interest.
2. Processing fee
Lenders impose a non-refundable one-time fee while processing the loan.
3. Pre-payment or part-payment charges
Individual borrowers with floating interest rates will not have to pay any charges for part payment. However, non-individual borrowers and individuals with fixed interest rates will have to pay charges for making part payment.
4. Foreclosure charges
Same as the part payment charges, individuals availing of floating interest rates will not have to make any foreclosure charges. But borrowers with fixed interest rate or non-individual borrowers with floating rates will have to pay a nominal fee as foreclosure charges.
5. EMI bounce fees
If a borrower fails to make his EMI on time or even within the grace period, then they have to pay the EMI bounce charge as penalty.
6. Statement charges
The borrower might have to pay statement charges for the loan statements or principal and interest statements separately on the interest.
What Are the Eligibility Factors For Availing a Loan Against Property?
Loan against property eligibility criteria tends to differ from one lender to another. However, the following are some of the basic requirements you must fulfil:
- Applicants must be residing citizens of India.
- An individual must receive a regular salary from his/her employer. In case of self-employed individuals, the applicant should have a sizable income from his/her business.
Lenders also specify an age group, and only those falling under this group can avail such loans. Moreover, you should maintain a credit score of over 750 to maximize your chances of securing a loan against property. Keep in mind that along with meeting these requirements, you have to furnish the documents required for a property loan.
Factors Considered for Loan Against Property Eligibility
The loan against property eligibility calculator uses the given eligibility criteria for loan against property analysis:
- Net monthly remuneration
- Date of birth
- City
- Loan tenure
- Existing EMI or monthly obligations, if any
- Other monthly income
- CIBIL score
- LTV ratio
- Work experience for employed individuals and business duration for self-employed.
Factors Affecting Loan Against Property Eligibility
Here are some crucial factors that play a vital role in determining your eligibility for a loan against property:
- Borrower’s age: Lenders prefer younger borrowers when it comes to such loans. An individual approaching the retirement age may find it difficult to secure such a form of credit.
- CIBIL score: A CIBIL score which is lower than 700 can lead to loan rejections as it indicates a poor history of loan repayment. Higher scores not only lead to easier loan sanctions but also lead to additional benefits like lower interest rates.
- Tenure: The tenure you choose while availing such a loan is assessed by the loan provider. It determines whether the lender is confident in your ability to repay the loan.
- Property documentation: Perhaps the most important part of the mortgage loan documents list is the property papers. Any irregularities in these documents can lead to the rejection of LAP applications.
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Steps to Increase Loan Against Property Eligibility
Now that you know about loan against property eligibility criteria, here’s how to ensure that you qualify for such a credit:
- Build your credit profile: Repay your existing dues on time to ensure a proper credit score. A score above 750 will assist you in availing all types of loans.
- Keep FOIR under 40%: Fixed Obligation to Income Ratio or FOIR is the proportion of monthly debt to monthly income. If this exceeds 40%, it signifies that more than 40% of your income goes toward clearing dues. Applying for a LAP at such a time could lead to rejection.
- Choose longer tenure: You can choose to opt for a long tenure to keep your loan EMIs down. When EMIs are nominal, a lender becomes more confident that you will be able to clear your debt without delinquency.
Additionally, look for a lender with relaxed eligibility criteria.
Benefits of Using Loan Against Property Eligibility Calculator
Manual calculations for loans are complicated and can have errors. A loan against property eligibility calculator has the following benefits:
It gives you a detailed information on the EMIs, the interest and principal division of EMIs and the remaining amount after the payment of EMI/s.
EMI calculation prior to availing of loan helps you compare and choose from the lenders.
These calculations are fast and precise. As these are system-generated, it has almost zero possibility of errors.
Repaying a Loan Against Property
A loan against property is a long-term credit, much like a home loan. You can opt for a tenure of up to 25 years for repaying this debt. Besides bearing the monthly EMIs, you can choose to prepay a lump-sum amount when you have excess funds available. This reduces the interest burden for the loan.
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Final Word
Assessing the loan against property eligibility criteria and necessary documents is crucial before signing up. Also, evaluate your property value before taking LAP. Doing so can simplify the process of application while maximising your chances of acquiring the advance.
In case you’re looking for LAP, try Navi Home Loan. With Navi, you could get LAP up to 90% of the property value at attractive rates starting from 8.39% p.a. The entire application process is 100% paperless with instant in-principle approval. Download the Navi app today!
FAQs
Ans: The repayment tenure for loans against property varies from one financial institution to another. However, it mostly ranges between 15 to 20 years.
Ans: Yes, you can have a co-applicant for a loan against property. However, only the following individuals are allowed to be the co-applicant:
The applicant’s parents
Parents and their unmarried daughter
The applicant’s spouse
The applicant’s brother
Ans: Any residential or commercial property can be used as security for a loan against property. However, some financial institutions let you use open lands as collateral for loans against property as well.
Ans: Yes, loans against property can be used as an overdraft. The financial institution approving the overdraft facility credits the amount and sets a limit for withdrawal. The interest is calculated on the withdrawal amount only on a daily basis. Deposit is at the will of the borrower.
Ans: Your property must have valid insurance when you want to avail a loan against it. Moreover, the insurance policy must stay in place for the entire tenure of this loan. You must submit documents related to this policy while availing such a loan.
Ans: A loan against property is available for both sole ownership and co-owned houses. In the case of a co-owned property, both owners would be named as applicants for the loan. Moreover, lenders will check the eligibility of both of these owners.
Ans: A mortgage is available on all of the following – self-occupied flat, apartment and house, commercial properties, and plot of land. Commercial properties can include shops, offices, malls, and other such complexes. Ask your lender about other property types on which it accepts loans against property applications.
Ans: Loan against property applications involve a processing fee. The exact percentage of this fee can differ from one lending institution to another. Generally, this fee is 1% of your loan amount. For instance, if the loan principal is Rs. 10 lakh, the processing fee would be Rs. 10,000.
Ans: Loan against property foreclosure refers to repaying the outstanding dues through a lump-sum payment. This effectively closes your loan account before the tenure runs out, thereby saving you a sizable interest payment. To foreclose such loans, you must write an application to your lending institution expressing your intention.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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