Loan against property (LAP), are basically loans provided by banks against the security of one’s own property. LAP is designed to meet the financial needs of someone who already owns a house or multiple properties so as to get the best out of their assets. Its important to remember that the property which you are putting up for your loan should be free any encumbrance (i.e. it is not given as security for any purpose or any other loan).
Banks provide LAP for both Salaried as well as Self-Employed individuals. The rates and loan amounts differ based on your property and your annual income.
The answer to the question of “Kitna Milega” is calculated on the basis of
- The percentage of property value that you own and
- How much income you have left after paying other EMIs that you can use for repaying this new loan.
How To Apply For Loan Against Property
- Property Verification/Valuation
- Sanctioning of the Loan
Characteristics of a Loan against Property
✔ Cheaper than Personal Loans: It works out to be much cheaper than a personal loan, which is usually issued at interest rates in the region of 16% – 21%.
✔ Longer Loan Tenure: The tenure for a Loan against Property is usually longer than that for a personal loan. Generally, LAP is given for a maximum tenure of 10 years.
✔ Lower EMI: Since the rate of interest is lower, many times, LAP Equated Monthly Installments (EMI) turn out to be cheaper than those under personal loans.
✔ Simple documentation and Fast Approvals: LAP being a secured Loan has comparatively faster approvals and minimal documentation
Important Questions on Loan Against Property:
The loan against property can be pre-paid along with the pre-payment charges. Usually the bank charges 2% of the principal pre-paid.
A nominal fees and charges are to be paid to the Bank depending upon their term and conditions.
Some financial institutions make LAP available only under the floating rate. Fixed rate loans are off limits. Borrowers need to enquire before finalising a LAP from lending institutions.
The processing of the loans usually takes 7 to 10 working days once all the documents are submitted. It also depends upon your profile and documentation.