Loan against property, as the name suggests, is applicable for individuals applying for a loan for purchase of a land/property, be it for commercial or residential interests. This comes off as a better option during times of financial crisis. Loan against property remains one of the most sought after loans in India, mainly due to the ever increasing real-estate prices. A take-over of existing loan, with options of refinancing is also made available by most banks.
What purpose can one use loan against property funds for?
Funding business and working capital needs of individuals, partnerships, private companies and SME’s
To purchase new property by pledging existing property
As lower cost alternative to personal use and uses such as marriages, education, vacation, home renovation, medical emergency
Benefit of availing Loan against Property (LAP) instead of other loans?
As loan against property is secured against property, banks offer lower rate of interest compared to unsecured business loans or personal loans
Loan tenure can be up to 18 years leading to lower EMI compared to unsecured loans where loan tenure can only be up to 5 years
No additional collateral or guarantee is required
Loan can be taken in name of company/ firm even if the property is owned in individual name of partners/ directors
How does the lending bank decide on the amount I can get as Loan against Property?
The bank looks at your repayment capacity along with considering various other factors as income, age, spouse’s income, assets, liabilities etc. and then calculates the loan amount. Usually the eligibility of the loan does not exceed 60% of the market value of the property under consideration.
Can there be a co-applicant for loan against property? If yes, who can be co-applicant?
It’s usually your spouse. But of the property is co-owned, all co-owners are co-applicants.
What are the processing fees for such a loan?
Usually around 1-2%.
What is the tenure of Loan against Property?
Loans against property, though subject to not exceeding your retirement age, has a maximum tenure of 15 years. This condition is however flexible in certain cases.
How to repay my Loan against Property?
Loans are repaid in the form of EMI (Equated Monthly Instalments).
What security will I have to provide?
Mortgaging of your property is mainly the security provided in this type of loan. Collateral security in the form of assignment of insurance policy or any such other financial instruments are also required, as deemed necessary by the bank.
Can I repay the loan ahead of schedule?
Yes. Prepayment is possible and there is no prepayment fee if you repay the loan after six months of availing the loan. However, this should happen from your own source of funds without transferring the loan.
How is my loan reassessed if there is a change in status from Non-Resident Indian to Resident Indian?
A revised repayment schedule is worked out after the repayment capacity of the applicant is reassessed. The new rate will be applicable as per the then current rates of resident Indian loans and the revised rates will be applicable on the outstanding balance.