Loan Against Property: What Is It and How to Apply?

If you are looking for funds to manage high education expenses of your children or take your family on an international vacation, loan against residential property can be a great option. Read this post to know what it is, how it works, and other important things about this type of loan.

Your home is much more than just a shelter for your family. It is an asset which can be used smartly to meet your financial needs. For instance, if you want to send your child abroad for higher studies or take your family on an international vacation, you can get a loan by keeping your house as collateral.

Known as LAP or Loan Against Property it is an excellent way to achieve your long-term goals or large expenses. Let us have a look at five important things related to this loan-

1. What is Loan Against Property?

LAP is a type of loan that allows you to pledge your property against the loan amount. To pledge the property, you should be the legal owner of the property, and there should not be any current loans on the property.

This type of loan is available for self-employed as well as salaried professionals. With LAP, you can get a loan from Rs. 10 lakhs to up to Rs. 5 crores.

2. Will the Loan Amount Only Depend on the Property Value?

No, apart from the value of the property, the loan amount will also depend on the type of property and your financial status. In most cases, lenders can offer up to 70% of the market value of the property as LAP.

For instance, if the current market value of your home is Rs. 1 crore and you meet the other loan against property eligibility requirements of the lender; you can get a LAP of up to Rs. 60 lakhs to 70 lakhs.

3. What is the Interest Rate and Loan Tenure of LAP?

The interest rate on LAP can significantly vary between lenders. You can get a LAP on fixed as well as the floating interest rate. Generally, the interest rate on LAP is in the range of 10%-12%, and the loan is available for up to 15 years.

You can get in touch with a lender you are interested in to know more about the current applicable interest rates. The loan against property interest rates can also vary based on your eligibility.

4. How to Apply for a LAP?

If you are eligible for LAP, you can fill the application form online or offline. Along with the application form, you will also be required to submit a few documents like-

• ID, address, and age proof
• Copy of the title deed of the property that will be pledged
• Bank statement of last 6 months
• ITR of the last two years
• Salary slips of last three months (salaried applicants)
• Address proof of office and business financials of last three years (self-employed applicants)

Depending on the lender you select, there can also be an additional requirement of documents for a loan against property.

5. What If You Are Not Able to Repay Your LAP?

As you have pledged your residential property against the loan amount, the lender will have a legal right to take possession of your property if you are unable to repay the loan on time. The lender can also sell the property to recover the loan amount.

Selecting the Right Lender for LAP

When choosing a lender for your LAP, make sure that you select one that has an excellent reputation among customers. Other essential factors that you should consider are the interest rate, loan tenure, loan amount, and repayment options.