Loan Against Property

Loan against property is a cheaper loan option as compared to other loan option in the market, whether it is a personal loan or a loan against security such as shares, jewellery. Come to think of it, even on the face of it-you see your house as an investment. So, first-take a loan to buy a house and then take a loan against it a few years later to meet your other needs.


LOAN AGAINST PROPERTY COMPARE

Have a property ( house or plot) to mortgage to raise money to fulfill some other obligations? Confused the way bankers talk. Solution lies with Apnapaisa compare quotes where you can glance through all the interest rates offered by various banks across the country. You should do that before selecting the lender as it is important for you to ensure as your property deserves the best deal.

To ensure that best deal, please fill in the form alongside stating all your details to get the list of lenders which can cater to your requirement.

Appreciate that interest rates here are higher than that of home loan.

The joy lies in Comparing!


LOAN AGAINST PROPERTY ELIGIBILITY CRITERIA

A loan against property (LAP) is a very good alternative if you need capital. Your property must have no outstanding ownership dispute associated with it and should not be mortgaged. If you can make repayments from your earnings, there is nothing to stop you from availing this loan facility.


LOAN AGAINST PROPERTY APPLY

Ownership of a property in addition to be used for the purpose of own residence or business can also be used for the purpose of taking business loans. The business loans are useful for the self-employed people. These business loans can be availed either by the manufacturer of a product or provider of any service. This business loan against property can also be availed by a person who is engaged in trading of goods be it wholesale or retail.

Business loans against property in India are provided by banks and NBFCs both. The rates of interest charged by the banks are relatively lower than those charged by NBFCs. These business loans against property are generally taken for the purpose of working capital needs of the business. In some of the cases the immovable property is secured and provided as collateral for the term loans taken for the purpose of capital expenditures like construction of factory building or purchase of plant and machinery.

These loans against property are generally secured by equitable mortgage of the property. In equitable mortgage the borrower deposits the original title documents with the lender without any further documentation.

The property to be mortgaged for the purpose of taking these business loans against property can either be a residential property or these loans can also be taken against security of your commercial property.

In addition to taking these loans against property, you can also avail these loans for the purpose of meeting any other expenditure like meeting marriage expenses in the family, these loans can also be resorted to in case of any emergency when money cannot be arranged from any other source.

In case of loans against property, the lender normally gets the valuation of the property done to arrive at the valuation figure of the property. The lender will normally lend you around 50% of the value of the property so arrived at by the valuer.

While deciding on the loan amount eligibility, the lender will always evaluate your ability to service the business loan taken. So your loan eligibility will also be constrained by your income. Normally the lenders grant loans equal to your two years income subject to a margin of 50 % of the value of the property.

While granting the loan you need to provide certain document so as to comply with the KYC (Know your customers) norms. This includes your address proof, proof of your income in the form of copy of return of income. In case of salaried employees the form no. 16 will be sufficient.

In case the loan against property is a business loan, you will also be required to submit your projected profit and loss account and balance sheet so as to convince the lender that you will be able to repay the loans and service the loans with the cash flow generated by your business.

These business loans are secured hence the rate of interest is lower than the ones charged for personal loans. Moreover it is relatively easier to get the business loans against property as compared to personal loan. The personal loans are available to only persons working with reputed companies and government employees. The business loans against property are available for a period even upto 15 years but the personal loans are available for a maximum period of 5 years thus the business loans are relatively easier to service as you get a longer repayment period.

The rate of interest on loan against property is around 13% to 16% against the around 16% to 26 % in case of personal loan.

You can either take straight business loan against property or you can use the same as overdraft account and pay for the money used only. In case of overdraft account you just need to pay the interest only and get the overdraft account renewed year after year.


LOAN AGAINST PROPERTY EMI

Loan against property is the mortgage offered by the banks and housing finance companies (HFC) against owned house property or even a plot. You must be having enormous amount of wealth but there are times in life, which can lead to shortage of funds for some of most important events i.e. personal occasions in family including marriages and education, starting a new or expansion of business. Loan can be taken against residential property and commercial property to execute any crucial events with ease.

To avail this, you should have stable income and clear title of property. It is also known as home equity loans. There should not be any outstanding loans on the property. Loan against property are cheaper, which can be used to meet different expenses when there will be no other source of income available. The property should be covered under an insurance policy during loan tenure.

Loan against property is a secured loan. The loan provider will do the property valuation and as per their valuation, loan amount will be sanctioned. Loan is available for any purposes except speculation. It can be also useful to repay existing expensive loans. Many important obligations can be managed by way of these loans. Amount to be sanctioned is calculated on the basis of various eligibility criteria such as income, occupation, credit history and cost of property.

EMI (Equal Monthly Installment) is the monthly installment paid to the lender for repayment of loan amount. Lenders offer loan up to the tenure of 15 years. EMI is calculated on the basis of interest rate, tenure and loan amount. Rate of interest in loan against property is low as compared to other type of loans i.e. personal loans. It differs from lender to lender accordingly to their respective base rate. Rate of interest is either fixed or floating interest rate. EMI amount will be less for longer term but the total interest amount paid will be higher.

EMI calculator will give a clear picture of repayment amounts over the tenure and how expensive the loan will result. Calculator will also give you the break up of total interest amount and principal amount paid. Individual can use calculator in different ways to get an appropriate EMI. Outflow can be adjusted by lowering the interest rate or by increasing the tenure to get a cheap EMI.

Please keep in mind; Individual should pay the EMI on time because any default in repayment will harm your credit history. Loan against property should be taken after prior discussion because lender will pledge the property in case of default in repayment of loan. Discuss quotations of different banks; select the one that serve your requirements.


LOAN AGAINST PROPERTY DOCUMENTS

The documents required while applying for loan against property are similar to those of home loanexpect for three additional documents. The documents required will vary from bank to bank.

• Identity proof:
A copy of any of these - passport, driving license, voters ID or PAN card with your photograph will serve the purpose of your identity proof.

• Proof of residence:
A copy of your passport, ration card, driving license, telephone bill, or electricity bill to show that you reside at the same place as mentioned in the documents.

• Income proof:
The proof of income for salaried individuals will differ from that of self- employed individuals. Salaried people need to submit their latest salary slip, Form 16 (along with salary certificate from the employer), and their bank statement for the last 3 months. Self-employed people need to provide their IT returns for the last 2 years, balance sheet, and profit & loss account, bank statements for the last 6 months as proof of income.

Photocopies of all the property documents need to be handed over prior to sanction of the loan.

The customer also needs to give a declaration stating that the loan amount would not be used for
  the purposes of carrying out any illegal activities or for speculative activities.

A valuation report of the flat from the professional valuer appointed by the bank.


LOAN AGAINST PROPERTY PROCESS

There are several steps in the process of getting aloan against property. A loan against property (LAP) gets you capital based on the value of your property. It is available for both salaried and self-employed persons and against commercial as well as residential property. All this and, you don't have to sell your property to raise the capital. It??s all yours to keep if you repay the loan taken.

Steps involved in the application process are:

• Application
• Processing
• Documentation
• Sanctioning of the loan
• Valuation and legal check
• Disbursement

Just as in case of every loan, the loan application begins the whole process. You will need to fill in a loan application with details, personal and professional, loan requirement, details of the property intended for mortgage etc. Make sure the details are filled in accurately.

Next comes the loan processing stage, the stage at which the loan process gains actual momentum. This could start with a personal discussion followed by the bank's field investigation.

Along with the application form and the credit documents, you may have to pay a processing fee to the bank, which could be 1-2 per cent of the intended loan.

An upfront fee could be collected to maintain your loan account records, sending income tax certificates every year, maintaining post-dated cheques, etc.

When you go for a personal discussion, carry all the original documents pertaining to the information provided on the application form. Do not submit any forged documents or lie about the financial details requested.

The bank's field investigation will follow; the bank might outsource this task to third-party verification agents.


DETAILED LIST OF DOCUMENTS REQUIRED

• Proof of income:
Copies of last three years income tax returns (along with copies of Computation of Income/Annual accounts, if any), Form 16/Form 16A, last three months salary slips, copies of the last 6 months statements of all the active bank accounts that reflect your salary/business income details etc.

• Age proof:
Copy of the school leaving certificate/driver's licence/passport/ration card/PAN card/voter identity card etc.

• Address proof: Utilities bills, such as phone and electricity bills, need to be provided to prove that you are actually staying at your current address.

• Identification proof:
Documents with your photograph.

Sometimes, one document, if it contains a photograph, the current residential address, and the correct age can be the proof for all three mentioned above.

• Employment details:
If your company is not well-known, a short summary about the nature of the company, its business lines, its main customers, its competitors, number of offices, number of employees, turnover, profit, etc. may be needed. Usually, the company profile that is available on the standard website of the company is enough.

• Property papers:
The bank may require title deeds and other documents relevant to the property. This will be important as the loan can be taken only against free-hold property. Also, it can be only about 40-60 per cent of the cost of property. It is important for the bank to establish the value of the property and its legal status before the offer can be considered.

Meanwhile, bank verifies your personal and employment details. The bank also does a valuation of the property.

Loan sanction is the next process in the series. At this stage, the bank has checked your financial credentials based on criteria such as your income, age, qualifications, experience, employer, nature of business (if self employed), etc. They work out the maximum loan eligibility, and an indicative loan amount that the bank is willing to offer.

• Offer letter/Sanction letter:
The bank now sends you an offer letter with details relevant to the loan. If these terms and conditions are acceptable to you, you can sign an acceptance copy.

Valuation and legal check on property and papers is the next stage where the focus of the bank will shift to the property that you intend to mortgage. Make sure the property papers and the relevant NOCs are in place. The bank's lawyer will check the property papers for their legality. The bank may also send an expert to visit the property. This expert could be a bank employee or an associate with a realty firm

Once the bank has ascertained all that it needs to be assured of you as a client, the property as a security, and your repayment capacity, it will disburse the loan. The bank does not enquire about the purpose for which you use the loan. Though, it stipulates that the loan should not be utilized in speculative activities.


LOAN AGAINST PROPERTY GUIDE

Loan against property (LAP) literally means a loan which is borrowed by keeping a property as a security and the documentation is done in a manner that in case of non repayment the property can be confiscated by the lending institution. An individual can borrow this type of loan only when he already owns a property which he can keep as a security with the lending institution. Loan against property is a secured loan as it is disbursed against a security i.e. a property already owned by a borrower. Hence, this loan is really different from a personal loan as it is an insecure loan which is loaned by a bank keeping in mind a borrower's borrowing capacity. Loan against property is loaned up to a certain limit which is, in most cases, is a certain percentage of the total value of the property being purchased. This is probably the best way to realize the potential value of an asset and is also the easiest way to raise funds in case of a need. This comes in handy especially at times when you want to undertake an investment but find your hands tied because of lack of funds, at that moment you can realize the potential of a property otherwise lying stagnant.

Borrowing a LAP is quite well known concept in India and has been in practice from a long time, but, the times have changes and with it has changed the conditions of LAP, thus making the decision of choosing a lending bank quite a task. Credit Favor is aware of the fact and thus has extended its services to make the process simpler for people interesting in getting a LAP. It has a number of banks in its panel which are ready to offer best possible proposals to the clients of Credit Favor. Adding to this the consultancy cuts off the paper work to bare minimum and simplifies the data for its clients. The institution also takes care that is clients aren't mugged by the mediators and get the maximum benefits of the loan they are applying for.

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