Loan against Property(LAP) is one of the variants of the Personal loan, Laps are secured loans offered by banks and financial institutions using one or more properties owned by you as collateral. One can avail these mortgage loans against commercial property and residential property collaterals. In a LAP the property is mortgaged and a fixed percentage of the prevailing market value of the property (normally between 60-70% of the value of the property) is given to the borrower as a loan. Though such a property is mortgaged to the lender, you are still allowed to continue using it for residential or commercial purposes.
These loans are a better option as compared to personal loans due to their comparatively lower rate of interest. Additionally, unlike gold loans, where the gold ornaments are deposited with the bank and you do not get them back until the loan is paid in full, you can continue using the collateral property in a LAP while you are repaying the loan.
Loans against property are a highly preferred form of loans in India, and are much more easily available with the surge in banks and NBFCs providing such loans. Along with being cost-effective, these loans are reasonably convenient to avail and repay due to the relatively low Loans against Property interest rate.
The repayment procedure for loan against property is almost same with home loan repayment procedure. Many leading lending institutions accept both part repayment and full repayment. Also, many financial institutions does not charges any extra fees on prepayment. You repay your loan against property in Equated Monthly Installments (EMIs) which comprise your contribution towards the principal amount as well as interest payment. Your EMIs will start immediately after you accept the full disbursement.
For salaried individuals, and for professionals and businessmen who are self-employed, the loan against property eligibility requirement in banks or for other institutions is pretty similar.
The Usual eligibility criteria to avail Loan against property are:
Loan against property is a secured loan i.e. the bank keeps the property documents as collateral during the term of the loan. Due to the reduced risk perceived by the bank in case of LAP, the interest rates on offer in LAP are quite low and usually close to the base rate.
Different banks offer Loans against property with options of fixed interest rate and floating interest rate to applicants to choose from.
Floating Rate: Floating or adjustable interest rate is not fixed. This type of interest rate varies according to prevailing market conditions
Difference between Loan against Property and Personal Loan:
By using a loan against property eligibility calculator, a borrower can calculate your eligibility for Loan against Property
. The calculator will help you know you eligibility in various cities in India. While determining loan against property, banks mostly look at the following factors – property value, repayment capacity, total assets and liabilities, age of the applicant and his/her qualifications, number of dependants, spouse’s income, and legal and technical aspect of your property. Based on your eligibility, bank will decide how much amount you would receive as loan against property.
Example: The State Bank of India provides a minimum of Rs.25, 000 and a maximum of Rs.1 crore as loan against property. The bank pays these amounts based on the following conditions: