Loan against property is a type of secured loan that you can avail by pledging a self-owned property with the lender. You can pledge a commercial or residential property. The maximum amount you can get against the property depends on a variety of factors like the type of property you pledge, the location and amenities of the property, the age of the property and more importantly, the lenders’ assessment of the property’s value.
Generally, most lenders provide up to 50% of the property’s value as loan against property. However, in some cases, if you have a good relationship with the lender, you can get up to 60% as a loan. One of the best things about applying for a loan against property or LAP is that the mortgage loan interest rates are much lower than the personal loan interest rates. Also, you get the LAP for a longer tenure than personal loan; the maximum period for LAP is 15 years.
If you are looking to apply for a loan against property, you must be aware of its following features.
When you avail of a loan against property, the lenders do not have any restrictions on how you can use the amount you borrow. You can use it for any purpose you want, right from paying for your child’s wedding/education expenses to paying the employees’ salary. It is a multi-purpose loan, you can even use it to buy a new property or a business asset, which may not qualify for a loan otherwise.
Unlike other secured loans like home loan in Delhi where your present income determines the maximum loan amount you can borrow, in LAP, the value of the property determines the eligible loan amount. Additionally, most lenders have standard eligibility requirements like high credit score, repayment capacity, etc.
Like any other loan, you must comply with certain documentation to get the loan against property. Generally, most lenders have simple requirements like identity and address proof, income proof, property ownership documents, and property valuation report (if any). Make sure that you always provide correct information in your application form as the lender will verify the same.
When you apply for a loan against property, you must be aware of the various costs involved. Typically, over and above the interest rate, the lenders may charge processing fees, stamp duty and other fees. The percentage of the processing fees may vary from lender to lender. It is better to choose the lender that has the lowest processing and other fees as it would affect your overall loan cost.
Generally, the lenders provide LAP for a maximum of 15 years. This gives you plenty of time to repay the amount you borrow. However, if you want to repay the loan earlier than the actual tenure, you may have to pay prepayment charges.
Transferring the loan
During the loan term, if you find another lender offering LAP at a lower interest rate and better terms, you can transfer the loan from the existing lender to the new lender. This is called balance transfer. However, before you opt for the transfer option, you must know if the new lender will charge a processing fee. Calculate the costs involved and make an informed transfer decision.
Now that you are aware of the LAP features, do your diligence before applying for the loan. Make sure that you always read the loan documents carefully before you sign it. This will help avoid any legal hassles in the future.