Loan Against Property

A loan against property (LAP) is a secured loan as you have to pledge your property as collateral to avail a loan from a financial institution. The loan amount sanctioned is ‌a percentage of the property's market value.

This type of loan can be used for various purposes, such as business expansion, education, debt consolidation, or any other financial requirements. The interest rates on these loans are often lower than unsecured loans because of the collateral provided, and the repayment terms can span several years.

Why take a Loan Against Property?

A Loan Against Property (LAP) is a solution for leveraging owned property for financial needs. It facilitates access to substantial funds at comparatively lower interest rates than unsecured loans, making it an attractive borrowing option. Its extended repayment tenure eases monthly financial obligations while retaining property ownership assures continued residential or commercial use.

However, timely repayments not only enhance creditworthiness but might offer tax benefits. LAP's swift processing further adds to its appeal, making it a preferred choice for those seeking significant funds with the advantage of leveraging property assets.

Loan Against Property Interest Rates

Interest rates for LAP typically range up to 8% per annum. However, it is also subjected to variations among lenders based on factors such as loan amount, property value, and borrower's creditworthiness. The table below shows the basic details of the interest rate associated with availing Loan Against Property.

Interest Rate Starting from 8 % p.a.
Loan Amount Up to Rs. 7 Crore
Loan Tenure Up to 20 years
Processing Fee Up to 2%
*Interest rates are dynamic and subject to change based on your creditworthiness.

Top Banks Providing Loan Against Property

The potential of your property for financial needs becomes seamless with leading banks providing Loan Against Property (LAP). State Bank of India (SBI), HDFC Bank, ICICI Bank, Axis Bank, and several other prominent financial institutions offer such loans. Follow the table below to choose the right financial institution that may match your requirements.

Lender's Name Interest Rate Loan Amount Tenure
IDFC First 8.00% p.a. onwards Up to Rs.7 crore Up to 20 years
HDFC Bank 8.00% - 8.95% p.a. As per the terms and conditions set by HDFC Bank Up to 15 years
State Bank of India 8.45% - 10.00% p.a. Up to 7.5 crore 5-15 years

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Loan Against Property Eligibility Criteria

Knowing the eligibility for your Loan Against Property will help you enhance the chances of approval and determine the loan amount and interest rates offered by the lending institution.

Nationality: Indian citizens

Age: Applicants must be aged between 28-60 years (salaried)

- Applicants must be aged between 25 - 70 years (professional salaried)

- Applicants should have a vintage of at least 5 years at their current business (in case of self-employed or business owners)

Employment Record: Applicants should be employed by a public/private firm or an MNC for at least 3 years

Documents Required For Availing Loan Against Property

The documents mentioned below are essential for the loan approval process in availing a Loan Against Property, ensuring better evaluation of the borrower's eligibility, property legality, and value.

Proof of Identity: PAN card, Passport, Driving License, Voter ID etc.

Proof of Address: Passport, Electricity Bill, Aadhaar card, etc.

Documents: Copy of original sale deed, allotment-possession letter, NOC from society.

Proof of Age: Passport, PAN card, etc.

Income Proof: Latest Income Tax Return Certificate, Form 16, salary slips, audited financial sheet, certificate of practice, qualification certificate, Shop Act License, Sales Tax Certificate, etc.

How to get Loan Against Property without income proof?

Banks usually require income proof for loan approval, but they consider other factors beyond income verification. Lenders review property value, credit history, financial stability, and alternative income sources. Individuals lacking a fixed employer find it difficult to provide income proof. In such cases, emphasizing property value, a solid credit history, and regular earnings from contracts or invoices is mandatory.

Features & Benefits of Loan Against Property

Loan Against Property comes its own benefits. With LAP, one can get the benefit of appreciation of the asset value, along with availability of cash while enjoying flexible repayment options and lower interest rates. There are other benefits that you can avail while applying LAP mentioned below:

Secured Loan: LAP is a secured loan where a property (residential or commercial) is used as collateral to secure the loan amount.

Higher Loan Amount: Borrowers can access substantial loan amounts based on the property's value, often higher than other types of loans.

Flexible End-use: Funds obtained through LAP can be used for various purposes, such as business expansion, debt consolidation, education expenses, home renovation, etc.

Extended Repayment Tenure: LAP typically comes with longer repayment periods, providing borrowers with more time to repay the loan and reducing the monthly repayment burden.

Keep Property Ownership: While using the property as collateral, the borrower keeps ownership and continues to use it for residential or commercial purposes.

Improved Credit Score: Timely repayments of LAP can positively affect the borrower's credit score, reflecting responsible financial behavior and enhancing their creditworthiness.

Quick Processing: Once the property evaluation and documentation are completed, LAPs can be processed relatively quickly compared to other secured loans.

Tax Benefits: Under certain conditions, the interest paid on LAP may be tax deductible, providing potential tax advantages to borrowers.

Versatile Use of Funds: LAP offers flexibility in utilizing funds for various financial needs without stringent restrictions.

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Loan Against Property Loan Amount

The loan amount for LAP varies among major financial institutions, often based on property valuation, income stability, and borrower's creditworthiness. The table below summarizes loan amounts for LAP offered by prominent financial institutions along with their corresponding interest rates:

Bank Interest Rate Loan Amount
State Bank of India 10.60% p.a. - 11.30% p.a. Up to 7.5 crore
HDFC Bank 8.95% p.a. - 10.25% p.a. Up to 60% of the value of the property
IDFC First 9.00% p.a. - 16.50% p.a. Up to Rs.7 crore
Tata Capital 10.10% p.a. onwards Rs.5 lakh – Rs.5 crore
Axis Bank 9.90% p.a. -10.35% p.a. Rs.5 lakh – Rs.5 crore

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Types of Loan Against Property

Understanding the LAP available provides borrowers with tailored solutions to address specific requirements. Here are the different Loan Against Property:

Residential Property Loan: Secured against a residential property, such as a house or apartment owned by the borrower.

Commercial Property Loan: Secured against commercial properties like offices, shops, warehouses, etc., owned by the borrower. This loan is specifically designed for business purposes.

Rental Disbursement Loan: The loan amount is determined based on the expected rental income from the mortgaged property, and the borrower can use this income to repay the loan.

Loan Against Plot of Land: Secured against vacant land owned by the borrower, this loan type can be used for various purposes, such as construction, investment, or any other financial requirements.

Lease Rental Discounting (LRD): In LRD, the loan amount is calculated based on the discounted value of future rentals from a property leased out to tenants.

Top-up Loan Against Property: Borrowers who have an existing LAP and have repaid a substantial portion of it might be eligible for a top-up loan against the same property, providing additional funds over and above the existing LAP amount.

How to Apply For Loan Against Property

Here is a step-by-step guide on how to apply for a loan against property:

Step 1: Check Eligibility: You should meet the eligibility criteria like age, income, property, and credit score requirements.

Step 2: Then compare offers and research different lenders' interest rates, fees, and terms.

Step 3: Then gather documents like KYC, income, property, and bank statements.

Step 4: Once you the required documentation handy then choose online or offline application, submit documents.

Step 5: After you have submitted the loan than you can get approval & disbursement then receive loan funds.

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Frequently Asked Questions

LAP is a secured loan where a property is used as collateral to get funds from a financial institution. The property can be residential, commercial, or land owned by the borrower.

Individuals who own a property (residential or commercial) and meet the lender's eligibility criteria regarding income, property value, and creditworthiness are eligible for LAP.

The loan amount ‌ranges from 50% to 75% of the property's market value, subject to the lender's assessment and policies.

Residential, commercial, or even vacant land owned by the borrower can be used as collateral for the LAP.

Yes, you can continue to reside in the property used as collateral unless otherwise specified in the loan agreement.

Interest rates for LAP usually range from 8% to 14% per annum, depending on factors like the lender, loan amount, property value, and borrower's credit profile.

The tenure for LAP typically ranges from 5 to 20 years, providing borrowers with a longer repayment period compared to other types of loans.

The loan-to-value (LTV) ratio for LAP is calculated by dividing the loan amount sanctioned by the property's market value, usually ranging from 50% to 75% depending on the lender's policies and assessment of the property.

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