Loan against Property Overview

Loan against Property Overview

A loan against property (LAP) is exactly what the name implies — a loan given or disbursed against the mortgage of property. Loan against Property is the perfect way to unlock the hidden value of your property. The loan is given as a certain percentage of the property’s market value, usually around 40 per cent to 60 per cent.

What purposes can I take a loan against property for?

Loan against Property can be taken for following purposes:

  • Business Expansion
  • Funding medical treatments
  • Education Expenses of children
  • Marriage expenses in the family
  • Improvement or Extension of existing Property
  • Medical Treatment
  • Any other personal Need.

What is the advantage of taking a loan against property in India?

  1. No restrictions on end Use
  2. Loan of up to 70% of the value of your property.
  3. LAP being a secured Loan has comparatively faster approvals and minimal documentation.
  4. Owners also have the option to avail a top-up on their existing loan.
  5. LAP allows the partial pre-closure without any penalties.
  6. Longer Repayment Tenure of 5 to 15 years.
  7. You can easily borrow against a residential or a commercial property.
  8. A businessman can avail tax exemptions on the interest component of these loans if he can prove that these loans aid him in the development of his business.

LAP vs. Personal Loans

Taking a loan against property is more or less like taking a personal loan the most important difference being the interest rates on LAP are way cheaper. Hence easier on the pocket as the Equated Monthly Installments (EMI) you pay become more nominal if the interest rates are not very high. A personal loan can be availed for only a maximum period of 5 years where as the maximum tenure for LAP is 15 years. The loan amount you would be eligible for in a Personal loan will be much less compared to the loan amount you can get through a LAP. Since the personal loan eligibility is primarily calculated on your personal and individual income while maximum loan eligibility for LAP depends on the market value of your property. Unlike LAP personal loan falls under the unsecured loan category.

Eligibility Criteria for Loan against Property

Different lending institutions use different criteria for lending but generally, lending institutions looks into the applicant’s’ repayment capacity and the current market value of property while deciding on the loan eligibility. Current market value of property is based on technical valuation report provided by valuation experts. Repayment capacity of the applicant is based on factors such as applicant and co-applicant’s current income, age, number of dependents, financial statements, banking habits, loan repayment history and business/employment stability.