A loan against property (LAP) is a unique credit facility offered by financial institutions, wherein an aspiring borrower can almost instantly avail of a secured loan by mortgaging a property they own. It could be a residential property, a piece of land, or even a commercial building.
You can use the loan against your property for varied purposes – the funds come with zero end-use restriction and can be used toward education, personal, or medical expenses.
Under this credit facility, the property is received as collateral. So, the loan is a secured one. And this is why the interest on a loan against property is comparatively lower than other unsecured types of loans. Financial lenders provide property loans based on the applicant’s income, creditworthiness, and age. Based on the value of the property, the borrower receives the finalized loan amount.
However, there are a few important things to note before availing of a loan against a property. These are mentioned below.
Which Properties Are Acceptable Collateral for a Property Loan?
Residential properties
Any residential building can be accepted as collateral by a financial lender. It can be a self-occupied building you are currently staying in, a rented residential property you have been using as your source of income or a vacant residential house that you are not using currently. Residential properties are a popular asset among lenders as it’s easy to liquidate them in case of defaults. Further, they retain market value over time.
Commercial properties
Commercial properties are widely used in collateral-based lending. This could either be a commercial property that you have rented out or a vacant building. What’s even better, if you put up an empty property as collateral, you will be able to avail of high-value loans more easily. But, there is a small catch. They are acceptable if there are no residential properties in the area and must be owned by individuals with no ongoing disputes over the property ownership.
Properties with Multiple Owners
You can also use a property that has several owners to avail of a loan against collateral. However, the property must only be shared among family members with the following relations:
• Mother and son
• Father and son
• Siblings
• Parents and unmarried daughter
Properties from third parties, such as friends, parents, or other relatives are accepted as collateral provided they satisfy the eligibility requirements.
Open Plots
Open lands may also be used as property loan collateral if they have a proper demarcation on the boundaries. The lands must be non-agricultural and must meet the minimum eligibility criteria.
How to Apply for a Loan Against Property or How Can I Get a Loan Against My Property?
Applying for an LAP loan is very simple. However, the process may vary from one lender to another. All you need to do is make sure that your documents for the property loan application are in place and are 100% accurate.
Follow the steps mentioned below to apply for a property loan:
- Visit the official website of the chosen lender,
- Fill in the property loan application form and attach recent passport-size photographs of yourself as mentioned in the guidelines.
- Upload all the documents requested.
- Submit the form and documents and kick-start your property loan application procedure.
The next few steps are also easy:
- You will first have to wait for the lender to complete the verification of your documents.
- Once this is done, you will receive the sanction letter from the lender.
- Next, you must wait out a little for the property evaluation and other mandatory legal checks.
- Once through, you will have the funds credited to your account.
The next question on your mind is possibly how long it can take to get the property loan. Once your lender completes the mandatory evaluation, the property loan amount is disbursed into the account. At any standard lending institution, processing a loan against property takes up to 72 hours. Besides, you may also avail of a commercial property loan to meet business needs.
Concluding Thoughts
A loan against property is easy to avail of. Many times, aspiring property loan borrowers tend to get carried away by the LAP loan rate interest rates and the high loan amount that lenders offer. Even aspiring borrowers who do not have a steady income can also avail of a secured property loan if they are an owner of a property. However, borrow only what you can easily pay off. Also, it is essential that you go through the property loan document thoroughly and the loan repayment terms. Keep in mind a few factors, such as the risk factors associated with LAP and the services offered by the lender. This will help select the ideal LAP option for you.
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