A Ready Reckoner of Loan Against Property

A loan against propertyis a unique loan. Unlike other loans, which come with elaborate terms, conditions, and eligibility criteria, a loan against property is relatively easy to understand.

This article provides you with every information you need about a loan against property, including theinterest rate, eligibility, documents required, loan amount, application, and approval process. 

What is a Loan Against Property, and How Can You Use the Loan Amount?

A loan against property is a no-frills no-tension loan that has no restrictions on the end-use. As a borrower, you can use the funds to purchase or construct a property, renovate or improve your home, sponsor your child’s higher education or wedding, spend on a foreign trip, or pay hospital bills. You can also use it for any other purpose, as long as it is legal and non-speculative. You can avail of a loan against propertyby mortgaging your freehold residential or commercial property. The lender keeps the original property documents in their safe custody until you repay the loan principal and interest in full. Since the loan is secured, lenders often offer more features and benefits than other loans.

What is the Interest Rate of a Loan Against Property?

The interest rate of a loan against propertydepends on the borrower’s profile and property’s worth. If your monthly income is decent and the property is in a proper location, you may expect the best rates. Loan against property interest rates is usually in the range of 9.50% and 11%. However, if you opt for the fixed-rate, the actual interest rate may one to two per cent higher than the prevailing floating rate.

What is the Eligibility Criteria of a Loan Against Property?

The following factors determine your eligibility for a loan against property:

  • Age – Your age should be at least 21 before you can apply for a loan against property. Also, your age should not exceed 60 (for salaried) and 65 (for self-employed) at the time of loan maturity.
  • Citizenship – You must be a resident Indian with valid documents that prove your citizenship.
  • Credit Score – Your credit score should be above 750. However, some lenders, such as PNB Housing, offer low-interest loan against property to borrowers with nil or low credit score.  
  • Monthly Income – Your monthly income should be considerably higher than the loan EMI. 
  • Property Status – The property should be dispute-free, and you must possess all the original documents.

What Documents Do You Need to Submit to Avail a Loan Against Property?

The following are the documents required to avail of a loan against property:

  1. Application form with a photograph
  2. Age proof
  3. Address proof
  4. Income proof, such as salary slips (for salaried) and Profit and Loss statement (for self-employed)
  5. Income Tax Returns for two years
  6. Six months bank account statement
  7. Original property documents, including registration papers, occupancy certificate, a title deed, etc.
  8. Processing fee cheque

How Much Loan Amount Can You Apply For?

The maximum loan amount you can get from a lender against your property is 60% of its value. Check your eligibility on loan against propertyeligibility calculator before choosing the right amount.

What is the Application and Approval Process of a Loan Against Property?

You can choose the online or offline mode while applying for a loan against the property. When you apply for the loan online, you can conveniently place the request and upload the documents online. The lender will inspect your property and evaluate the documents before disbursing the loan amount. The offline mode is slightly more time-consuming but best suited for people who are not familiar with the online application process.

Conclusion

A loan against property offers quick approval when you meet the eligibility criteria. Read the terms properly and select the right lender to receive maximum benefits.