Repaying with Confidence: A Comprehensive Guide to Loan Against Property
Sometimes, it becomes challenging to meet the costs of house renovation, marriage, child’s education, etc., and using credit cards for this purpose may be insufficient. Under such circumstances, the best solution is to avail a loan against property (LAP).
Due to its easy approval and reasonable interest rates, property loan has emerged as an excellent credit option down the line. Furthermore, borrowers find it easy to repay a loan against property owing to its flexible repayment terms. Keep reading to learn more about LAP, its benefits, eligibility, documentation, application, and more.
What is a loan against property?
A loan against property or mortgage loan is the amount of credit taken by pledging residential or commercial property. These properties serve as collateral until the borrower makes the repayment of his/her loan amount. Most lending institutions provide LAP at a nominal interest rate and sufficient time for repayment, thus, making the entire procedure straightforward and hassle-free.
Generally, mortgage loans are long-term commitments where the borrowers get the scope of repaying the loan amount at their own pace for up to 20 years. However, if they fail to make the repayment on time, the lending institutions have the right to sell their property and recover the loan amount.
What are the benefits of loan against property?
Following are some of the common advantages that people enjoy by taking a loan against property:
● Reasonable interest rates
Undeniably, a low interest rate is one of the prime advantages of a loan against property. Since the lending institutions have the right to seize and sell the property of the borrower in case of any loss or failure in repayment, the level of risk is lower than unsecured loans. Subsequently, they freely charge a reasonable rate of interest, which reduces EMIs and financial strain on the borrower. If a borrowing person finds difficulty in computing the monthly instalments, he/she can use the loan against property EMI calculator.
● Longer repayment tenor
When it comes to loan against property, borrowers get the scope of repaying it over a substantial period of time. Even though the tenor of repayment varies from one lender to another, an individual can easily get a period between 10 years and 20 years to repay the entire sum of money. Due to the extended tenor, borrowers can enjoy budget-friendly EMIs, which streamline the repayment process.
● Quick approval of loan
For property loans, the nature of approval is easier than other unsecured credits like business loans, personal loans, etc. Here, all that a borrower needs to do is to meet the simple eligibility parameters and submit the necessary documents like ID proof, address proof, property papers, etc. Once the authenticity of a borrower’s documents is verified by the lender, he/she receives the loan amount.
● Ample sanction amount
While applying for a loan against property, the lending institution provides a credit amount equal to the percentage of the current market value of the borrower’s property. Based on the nature of property, i.e. residential or commercial, the amount of credit offered ranges between 70% and 75% of the asset value of the borrower. For instance, if an individual is pledging a property worth Rs.2 lakh, he/she can avail a credit amount of up to Rs.1.5 lakh for financing his/her goals.
● Loan against property tax benefits
If an individual uses his/her loan amount from LAP for specific purposes, he/she may get certain tax benefits on interest. According to Section 37(1) of the Income Tax Act, borrowers are allowed to get tax benefits on interest and processing charges if they are using the LAP for business purposes.
What are the eligibility criteria for loan against property?
Following are the eligibility criteria of property loans for both salaried and self-employed individuals:
- Applicants must possess Indian citizenship
- Age of salaried borrowers should be between 28 years and 58 years
- Make sure age of self-employed borrowers should be between 25 years and 70 years
- Self-employed applicants should have a business experience of at least 5 years alongside a steady income.
- Salaried applicants must have a minimum of 5 years working experience at an MNC, private, or public sector organisation
After fulfilling the above-mentioned eligibility constraints, borrowers can proceed with the process of documentation.
Know What are the documents required for loan against property?
Here is the list of documents that both salaried and self-employed borrowers need to furnish for availing a loan against property:
- Proof of identity
- Proof of address
- Income proof for salaried persons (current salary slips of previous 3 months, bank account statements for previous 3 months)
- Income proof for self-employed individuals (bank account statements for previous 6 months, profit and loss account, balance sheet, etc.)
- Business proof documents (commencement certificate, copy of Sales Tax, partnership deed, etc.)
- Copy of Form 16
- Income Tax Returns (ITR)
- Property documents
What are the steps to apply for a loan against property?
Following is the step-by-step process by which an individual can apply for a loan against property:
Step 1: Navigate to the official portal of a preferred lender
Step 2: Visit the ‘Loans’ section and choose ‘Loan against property’
Step 3: Complete the eligibility parameters and click on ‘Confirm’
Step 4: After this, applicants should click on the ‘online application form’ for a property loan
Step 5: Borrowers must fill out the application forms with their personal details and property-based information
Step 6: Individuals must enter their financial status and income details in order to access the loan offer
Step 7: After choosing their preferred loan offer, applicants need to double-check the application form and upload the supporting documents
Step 8: Click on ‘Submit’ and wait for the verification
Step 9: After the verification process is successful, the borrower will get the letter of sanction from the lending institution
Step 10: Finally the borrower will receive the loan amount in his/her respective bank account within a few days.
Many reputed lenders provide customised pre-approved loan offers to their existing borrowers on secured financial products like home loans, property loans, etc., which accelerates the lending process. Borrowers can easily check their pre-approved offers by entering their name and contact details.
Loan against property serves as an excellent credit option for financing monetary emergencies and goals. It is an ideal way to get flexible loan amounts with easier rates of interest, lower EMIs, hassle-free documentation, etc. Besides, it is easy to repay a loan against property. However, before applying for this credit facility, borrowers need to compare the loan offers of various lending institutions and make their choice with diligence.
