What is Loan Against Property?
A loan against property (LAP) is a secured loan through which a borrower places their property with a lender as collateral to gather a large sum of financing. Since this loan is secured, lenders are less hesitant of extending sizeable sanctions. A loan against property or a mortgage loan, unlike other loan forms, such as personal loans or gold loans, has a much lower rate of interest as the loan is secured against the property.
Loans against property allow the borrower to continue enjoying the property during the tenor of the loan and the funds that you receive do not have any usage restrictions and can be used for any expense that you may have, such as travelling expenses, debt consolidation, business expenses, property renovations, business expansion etc.
While it is easy to receive approval for a loan against property, there are a few guidelines for making an application and adhering to them will help you meet the eligibility criteria better.
Here are the factors that help acquire a loan against property:
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Credit Rating:
A CIBIL score is a three-digit number scored on a scale of 300-900. It is important to maintain a high CIBIL score as it dictates your eligibility for loan against property. A score between 750-900 is preferred as it helps procure better lending terms as it speaks well to your repayment capacity and credit utilisation behaviour.
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Employment Status:
The applicant’s work experience and employment profile are important aspects that are inspected before sanctioning a loan. Lenders want to ensure that you are capable of making monthly instalments regularly for the duration of the loan, and this can only be possible if the borrower has a stable job with a regular income. Another aspect of the borrower’s employment status is how frequently are there job switches in the borrower’s career. This behaviour is crucial for the lender to know as it lets them know about the borrower’s financial stability.
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Loan Tenor:
When applying for a loan against property, it is in your best interest to verify your loan affordability with the help of an online LAP calculator that helps establish the EMI amount and tenor of the loan, mapped against the rate of interest you want. Having the right tenor can help your repayment journey in multitudes as you will no longer struggle to meet the EMI amount every month.
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Property Age:
Another eligibility factor for applying for loan against property is the age and condition of your property. If your property is well maintained and in a desirable location, the chances of getting your loan application approved are much higher, in comparison to a property that is not looked after. Lenders refrain from approving loan sanctions against such properties as it reduces the resale value of the property and increases the risk factor.
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Documentation:
When applying for a loan against property, you need to submit a list of documents for verification, and in case the documents do not clear the verification then your loan against property application will be rejected. Also, it is important to know that if any fake document is identified, then you can be subjected to legal repercussion. Here is the list of documents required to submit when applying for a loan against property:
- ID Proof such as Aadhaar card, PAN Card, Driving License, Passport, Ration Card etc.
- Address Proof, including any Government ID, Electricity bills, Property Tax receipt etc.
- Income Proof such as salary slips
- Bank account statements for the past 6 months
- Income Tax Returns for the past 3 years
- Property Documents such as Title deed, Transfer Papers, Sale Deed
Having kept all of these in mind, go ahead and make your loan against property application and expect a speedy approval.
