Loan against property (LAP) is a specialised credit facility availed by collateralising residential or commercial properties. Being a secured loan, the level of risk in LAP is comparatively lower for lenders than other types of loans. This is because if the borrower fails to repay the loan amount, the lender can sell his/her collateralised asset to recover that money.
In recent years, property loans have gained immense popularity among borrowers due to their low-interest rate, minimal paperwork, and pocket-friendly EMIs. Keep reading to know how to get a loan against property in the best possible way.
Mentioned below is the simple step-by-step procedure by which borrowers can avail the best loan against property for themselves:
Step 1: Need to visit the official website of a preferred lending institution
Step 2: Navigate to the‘Loans’ segment and click on ‘Loan against property’ option
Step 3: Check the eligibility requirements and select ‘Confirm’
Step 4: Then the applicants need to click on the ‘online application form’ for a mortgage loan
Step 5: After this, borrowers have to fill out their respective application forms with personal details and property-based details
Step 6: Applicants have to provide their prevailing financial status alongside the income details to access the loan offer
Step 7: Borrowers should compare the loan offers and choose the best one that provides maximum financial benefits.
Step 8: Applicants need to cross-check their application form and upload the necessary documents before clicking on ‘Submit’
Step 9: After submitting the application form applicants have to wait for the verification
Step 10: As soon as the verification is successful, borrowers get the sanction letter from their preferred lender
Step 11: Once approved, the loan amount is credited to the bank account of the borrower shortly afterwards.
However, before availing the best loan against property, borrowers need to fulfil the eligibility parameters and gather the supporting documents.
The eligibility parameters for property loans vary from one lender to another. Here are some common criteria that everyone has to fulfil in order to avail a loan against property:
- Nationality: Both salaried and self-employed applicants must have Indian citizenship along with the collateral asset located within the country.
- Ownership: The loan applicant should have legal ownership over the property which will be pledged as collateral.
- Age: The age range for salaried applicants range between 28 years and 58 years while for self-employed borrowers it ranges between 25 years and 70 years.
- Income stability: Both salaried and self-employed applicants need to have a steady source of monthly income.
- CIBIL score: Ideally the borrower should retain a CIBIL score of 700 or more in order to get quick approval of the loan.
- Work experience: Self-employed borrowers must have a business experience of minimum 5 years while salaried applicants need to have at least 5 years of working experience at an MNC, private, or public company.
Once the borrowers fulfil the eligibility criteria, they have to gather the supporting documents to avoid the last-moment rush.
Even though the documentation involved in property loans is quite minimal, both salaried and self-employed individuals need to furnish some common documents as mentioned below:
- ID proof documents required (PAN card, Aadhaar card, passport, voter ID card)
- Address proof documents required (Aadhaar card, ration card, electricity bill)
- Income proof (bank account statements for the previous 6 months, profit and loss statement, and balance sheet)
- Business proof documents (commencement certificate, certificate of incorporation, partnership deed)
- Income Tax Returns (ITR)
- ID proof (PAN card, Aadhaar card, driver’s licence)
- Address proof (Aadhaar card, telephone bill, rental agreement)
- Income proof (current salary slips of previous 3 months, bank account statements for previous 3 months)
- Income Tax Returns (ITR)
- Copy of Form 16
Apart from the above-mentioned documents, individuals should not forget to submit their property papers since they are the most crucial ones.
Following below are the property-based documents required for availing a loan against property:
- No encumbrances proof
- Share certificate
- Occupancy certificate and a copy of the approved plan
- Gift deed/sales deed as per the applicability
- Latest maintenance bill receipts
Individuals applying for property loans should keep certain things in mind beforehand to ensure smooth and flawless processing:
● Asset valuation
When borrowers collateralise their property, lenders will assess its market value in accordance with the prevailing market rates. Based on the asset valuation alongside the documents furnished by the borrower, the lender sanctions the loan amount of up to 70-80% of the asset value.
● Rate of interest
Generally, the interest rate for loans against property is lesser than unsecured loans like personal loans, business loans, etc. However, it is sensible to conduct market research and compare the interest rates provided by different lenders. By doing so, the borrower can figure out the best loan offer for them.
● Asset ownership
Lenders may reject an individual’s loan request in case his/her pledged asset is disputed or the property papers are improper. Besides, if the property has multiple ownerships, the lender may disapprove the loan. Thus, to avoid property loan rejection, applicants should furnish genuine documents and meet the terms and conditions of the lender.
● Loan tenor
One of the key benefits of a loan against property is its extended repayment period provided by the lenders. Some LAPs offer a tenor of up to 15 years while few extend up to 20 years. Here, borrowers need to create a balance between their tenor and EMIs to make the repayment hassle-free. If there is any problem, they can use the property loan EMI calculator to get instant and accurate results.
Many reputed lending institutions offer pre-approved offers on products like housing loans and mortgage loans. These loan offers expedite the lending procedure. Existing borrowers can check their pre-approved loan offers by entering their credentials on the lender’s website.
LAP is the most popular choice among credit borrowers owing to its easy eligibility parameters, low-interest rates, and minimal documentation. However, before planning to get a loan against property, it is essential for an applicant to compare the loan offers of various lenders and choose the one that suits them best.