Loan Against Property (LAP) is a lucrative option for individuals looking to raise funds for various purposes such as business expansion, home renovation, education expenses, medical treatment, etc. LAP is basically a loan taken against the mortgage of a self-owned property, which could be a residential or commercial property. It is a secured loan that can be availed for up to 70% of the property’s value. However, before applying for a LAP, borrowers should be aware.
Things You Need to Take Care While Making an informed decision:
1) Eligibility Criteria:
The borrower must be above 21 years of age and should have clear ownership of the property that is being offered as collateral. The property should also be free from any legal encumbrances.
2) Loan Amount:
The loan amount varies from lender to lender, but typically it can range from Rs.10 lakh to Rs.10 crore, subject to the value of the property and the borrower’s eligibility.
3) Interest Rate:
Loan against property rates are usually lower than personal loan interest rates as it is a secured loan. The interest rate varies from lender to lender, but typically it ranges from 8% to 15%.
4) Processing Fees:
Lenders charge a processing fee for LAP, which is usually a percentage of the loan amount. The processing fee can range from 0.5% to 2% of the loan amount.
5) Loan Tenure:
The loan tenure for LAP varies from lender to lender, but typically it can range from 5 to 20 years. The borrower can choose the tenure as per their repayment capacity.
6) EMI Calculation:
The EMI (Equated Monthly Installment) for LAP can be calculated using a LAP EMI calculator. The borrower needs to input the loan amount, interest rate, and tenure, and the calculator will provide the EMI amount.
7) Documents Required:
While applying for LAP, the borrower needs to submit the following documents:
– Identity Proof
– Address Proof
– Income Proof
– Property Documents (Title Deed, Sale Deed, etc.)
– Tax Returns (for self-employed borrowers)
8) Prepayment Charges:
Most lenders allow prepayment of LAP without any penalty. However, some lenders may charge a prepayment penalty if the borrower repays the loan before the completion of the agreed tenure.
9) Credit Score:
A good credit score is essential for availing LAP as it indicates the borrower’s creditworthiness. A score of 750 or above is considered good and increases the chances of getting a loan approved at a favorable interest rate.
10) Property Valuation:
The lender will appoint a valuer to assess the value of the property being offered as collateral. The valuation report plays a crucial role in determining the loan amount and the interest rate.
In conclusion, A loan against property is a secured loan that provides a lower interest rate as compared to unsecured loans. However, before availing the loan, borrowers should consider their repayment capacity, the loan amount required, and the interest rate offered by the lender.
They should also ensure that they have all the required documents and have a good credit score. Being informed about the loan against property process and aware of essential details such as property valuation, prepayment charges, loan tenure, and prepayment charges can help borrowers make informed decisions and avoid any unpleasant surprises later on.