January 5, 2019

Loan Against Property

Loan against Property is one of the safest loan to provide for the lenders. In this type of loan the property would act as a security against the amount of loan borrowed from the bank. Financial institutions and banks offer this loan on the assurance of a property; the property can be a residential building or commercial building or agricultural land or a piece of land. The amount of loan that would be sanctioned depends on the kind of property and the market price of that property. In most cases, the bank sanction loan amount from 40% to 60% of the original market price of that property.

Should you apply for a loan against property?

You can apply for a loan against property for any form of personal or business need. The loan can help you meet any of the below needs

  • To scale and explore new sectors
  • Buy machinery and materials for the current business
  • To handle or establish a new unit of business
  • To meet the need of extra money for the extravagance of son or daughter’s marriage
  • To fulfill the dreams of completing your child’s higher education without any interruption
  • To purchase a new property or to construct a new home
  • To arrange funds for a sudden medical emergency of you or your family members to save their lives

Benefits of applying for a loan against property

  • A loan against property allows a person to get funds for a large tenure. The loan applicant can repay the loan amount with interest conveniently in smaller instalments. This would help the borrower to reduce the monthly EMI by increasing the loan repayment tenure
  • Usually the sanctioned loan amount for a loan against property can vary from 40 per cent to 60 per cent of the property’s market price
  • A loan against property is a risk free loan for both lenders thus it is provided at lower interest rates than personal loans
  • The banks provide the most amount of money with less and reasonable interest rates.
  • Large loan repayment  tenure up to 15 years
  • The loan amount is sanctioned based on the market price of the mortgaged property, thus the borrower can get large funds quickly with a high worth property

Difference between personal loan and loan against property

Personal LoanLoan against Property
Secured / UnsecuredUnsecured loanSecured loan
Interest RateHigher interest rateLower Interest Rate
Loan TenureShort term loan, lower tenureHigher repayment tenure
Loan AmountBased on Income / BusinessBased on Property value
Security No collateral requiredResidential / Commercial Property required

Loan against Property Eligibility Criteria

The eligibility criteria for loan against property vary from one bank to another, however most of the criteria are often the same. The eligibility criterion is based on the occupation of the loan applicant among other factors. Most of the banks give loan against the property to NRIs, after verification of all the required documents.

Loan against Property for Salaried &
Self-employed Individual

Salaried individual should have a minimum income of Rs. 25,000 per month to get the loan against property. The loan applicant should be between 18 years to 70 years of age, however the age criteria may differ from one bank to another. Additionally, the applicant would need to submit his or her latest salary-slips with six month bank statements.

Self-employed individuals would need to provide proof of existence of their business. Proof of income with IT Return and balance sheet would be required. Banks and NBFC may check the business continuity and may desire at least three years business continuity without any conflicts.

Documents required to apply for a loan against property

  • The applicant should provide a government approved identity proof
  • The applicant has to submit the copy of proof of his or her residence.
  • A fully detailed application form with a latest photograph of the applicant for the loan
  • All documents related to the applicant’s property
  • If the applicant is a self-employed individual, he/she has to submit the details about his or her educational qualifications. Such applicants should provide the proof of their business existence.
  • A copy of the income tax returns
  • Processing fee cheque
  • Latest bank statements for last six months
  • Details of all other existing loans of the applicant