Complete Guide to Loan Against Property

Certain expenses like overseas education, medical bills, home renovation, wedding, etc., are too significant for an individual to pay off from their savings. Even your credit card may not cover these expenses, and hence, you have to look for a better and more efficient alternative. Fortunately, this is the time when you can make most of your asset holdings, typically a home or commercial property.

A loan against property or a mortgage loan is precisely that; pledging property to a lender for securing a loan against it. A loan against property or LAP is a secured loan that one can avail of by providing an asset or property as collateral. Your pledged property remains with the lender as security until the loan amount is fully repaid. Generally, the interest rates offered for LAP are lower than other loans like personal loans, as the lender has lower risk because of the availability of collateral. While LAP is a convenient way to acquire funds, one needs to understand how it works, its documentation requirements, and its application. This article will help the reader understand the complete loan against property process.

1. Features & Benefits of LAP Loan

A loan against property is considered a multi-purpose loan since the borrower can use the funds acquired to fulfill any financial obligation. Here are some of the significant features and benefits of a loan against property.

• Lower Interest Rate: As mentioned earlier, LAP has a lower interest rate than a personal loan, home loan, car loan, etc. Typically, a mortgage loan is secured, rendering a lower interest rate. Moreover, the chances of getting a loan at a lower interest rate increase if the borrower has a good credit score.
• Flexibility Repayment: Generally, a loan against a property has a flexible repayment term. In fact, a borrower can obtain a loan repayment term of up to 20 years, depending on the lender they choose.
• Continuous Ownership of the Property: One of the significant misunderstandings about LAP is that the borrower loses ownership of the property. However, that is not true as the borrower retains ownership of the property. This also gives the borrower an option of selling the property if they cannot repay the loan.
• Simple Documentation and Approval Process: The documentation and approval process for LAP is quite simple. In this case, the property works as collateral to secure the loan, which allows the lender to proceed with simple documentation.

2. LAP Eligibility Criteria

Before getting into the documents for a loan against a property, it is essential to know the eligibility criteria. The eligibility criteria may vary depending on the bank or financial institution you choose.

• The applicant should be the rightful owner of the property pledged for the loan.
• The applicant should be salaried or self-employed with a stable and regular income source.
• The minimum age of the applicant should be at least 21 years.
• The minimum gross annual income (GAI) should be INR 3 lakh. This is inclusive of co-applicant/s, whose income is considered for eligibility.
• An applicant must be a salaried individual or self-employed business person, or agriculturist, who should be employed or engaged in business/profession for ~3 years.

3. How to Apply for LAP?

Applying for a mortgage loan varies with every bank and NBFC. Some banks have extensive processes, while others offer an online portal to fill in the form and submit documents. Here is how to apply for a loan against property in a bank.

• Fill in the loan application form carefully and attach two passport-size photographs of yourself.
• Attach all the documents requested.
• Submit the form and documents to the bank where you have applied for the loan.

While the above-mentioned is a traditional way of applying for LAP, one can use online loan aggregator platforms. One can compare LAP provided by different banks and financial institutions on these platforms and choose the best-suited option. It is a hassle-free way to acquire funds through LAP.

Final Thoughts

A loan against property is a secure financial arrangement and can help you fulfil financial obligations in your time of need. However, you should have a thorough understanding of how LAP functions and what documents are required. Read through the fine print and understand the terms and conditions mentioned in the form.

You can apply for a loan against property on KuberX, a tech-based loan aggregator platform. KuberX by Aurum PropTech is a new-age platform to acquire home loans, top-up loans, balance transfers, and a loan against property. Users can compare loans offered by different banks and financial institutions and select the best-suited option. To know more about it, visit KuberX.