If you are looking to raise funds in a short period but are unsure of how to go about it, then taking a loan against property might be a good idea. A loan against property, also known as a property or mortgage loan, basically allows you to avail of a loan by mortgaging a commercial or residential property with the lender (financial institution or bank).
If you have a well-maintained property in a major city of India, then you don’t need to liquidate it to arrange a large amount if your need funds. Why?
It is because you can avail of a loan against property (LAP loan) and get a considerable amount at a lower rate.
What Purposes Can a Loan Against Property Serve?
The funds received from a loan against property can be utilized to meet various purposes. You can use the money to:
- Fund your child’s higher education
- Fund a big fat wedding in the family
- Meet emergency medical expenditures
- Start your new business venture or expand an existing one
- Fund a domestic vacation or an exotic international trip
LAP is a unique solution that lets you pledge your property as collateral with a lender and arrange a huge amount.
How Will a Loan Against Property Benefit You?
A LAP loan comes with several benefits. The following are some of the highlights:
Higher Loan Amount
With a loan against property, you can receive a considerable amount, as high as Rs.5 Crore or higher, provided that you fulfil the eligibility criteria. The chances of loan rejection are more in unsecured loans like personal loans or others.
Multiple Repayment Options
You have the option of paying off the loan amount partly or completely in advance with zero charges over a prolonged period of up to 18 years.
Low Rate of Interest
Since mortgage loans are secured in nature, the loan against property interest rates is relatively lower than other types of loans.
The approval for LAP loans usually comes easy and prompt. In most cases, it takes about 4 working days for the loan to get disbursed once approved.
Hassle-free Paperwork & Processing
A property loan application involves minimal documentation, which is why they are processed faster.
Part/Prepayment of Loan
You can choose to pay the loan amount entirely or partially before the maturity date as per convenience.
Eligibility Criteria & Documentation
The first step towards availing of a loan against property is to meet the basic criteria and fulfil all documentation – it is a quick and fairly simple procedure.
Check out the following parameters to know your eligibility:
- Your income – this determines your capacity to pay off the loan
- Proof of identity and residence
- Proof of income tax returns
- Previous bank statements
- Salary slip (Form 16) to validate income and stability
- All property documents
- A good credit score (preferably equivalent to or above 725)
Steps to Applying for a Loan Against Property
To apply for a LAP loan and raise your funds faster, follow these steps:
- Fill out the application form – enter your personal, employment and property details
- Once filled out, crosscheck all details to avoid any discrepancies and confusion
- Furnish all necessary documents (as mentioned above)
- Verify all documents and information with the lender
- Upon successful completion of the verification procedure, get the sanction letter from your lender
- Wait out the legal check and property evaluation period
- Once all this is done, you can expect the loan amount to get disbursed to your account within 72 hours of the final go-ahead
A loan against property is one of the fastest ways to raise money to cater to financial goals. However, one major drawback of this type of financing is that in case the borrower fails to pay off the loan, the lender reserves the right to ownership. Self-employed individuals are eligible for tax benefits on such loans. Make sure you have taken into account your monthly income, outstanding debts (if any), loan against property interest rates, loan tenor, and ability to repay the loan, before opting for the loan. Feel free to use an online LAP EMI calculator to evaluate your monthly payable EMIs.