When it comes to borrowing money for a major expense, opting for a loan against property can be a viable option. This type of loan allows borrowers to use their property as collateral, which means that they can borrow a substantial amount of money at a lower interest rate compared to other types of loans.
However, before you apply for loan against property, it is important to understand the eligibility criteria and the key factors that lenders take into consideration while approving the loan. In this article, we will explore these factors to help you determine your loan against property eligibility.
Loan against property eligibility
Before discussing the loan against property eligibility, it is important to understand what this type of loan entails. A loan against property, or LAP, is a secured loan that allows borrowers to use their property as collateral for the loan amount. The property can be residential or commercial, and the loan amount can be up to 70-80% of the market value of the property.
While the loan amount and interest rate will vary depending on the lender and your profile, there are some general eligibility criteria that most lenders look for. These include:
Property ownership and title
The first and foremost requirement for a loan against property is that the borrower should own the property that they are using as collateral. The property should have a clear title, free from any legal disputes or encumbrances.
To determine the ownership and title of the property, lenders usually ask for a set of documents, such as the property deed, sale agreement, property tax receipts, and so on. Make sure that you have all these documents in order before applying for the loan.
Property valuation
Another key factor that lenders consider while approving a loan against property is the market value of the property. The loan amount that you can get will be based on the property’s current market value, which is determined by a certified valuator.
Lenders usually have a panel of valuers that they work with, and they will ask for a property valuation report from one of these valuers. Make sure that your property is in good condition and that there are no major maintenance or repair issues that could affect the valuation.
Income and employment
While a loan against property is a secured loan, lenders still want to ensure that the borrower has the financial ability to repay the loan. For this reason, they will look at your income and employment status to determine your loan eligibility.
Lenders usually ask for proof of income, such as salary slips, bank statements, tax returns, and so on. They will also check your employment history and stability, as well as your credit score and credit history.
Age and citizenship
Most lenders have a minimum and maximum age requirement for loan against property applicants. Usually, the minimum age is 21 years, and the maximum age is 65-70 years, depending on the lender.
In addition, lenders may require borrowers to be Indian citizens or have a valid visa or work permit if they are foreigners.
Loan against property documents required
Now that we have discussed the eligibility criteria for a loan against property, let’s take a look at the documents that lenders typically require for this type of loan:
- Property documents: Property deed, sale agreement, property tax receipts, building plan, NOC from relevant authorities, etc.
- Identity proof: Aadhar card, passport, driving license, voter ID, PAN card, etc.
- Address proof: Utility bills, passport, driving license, etc.
- Income proof: Salary slips, bank statements, tax returns, Form 16, etc.
- Employment proof: Offer letter, appointment letter, employment contract, etc.
- Other documents: Passport size photographs, loan application form, etc.
Make sure that you have all these documents in order before applying for a loan against property. You may also be required to submit additional documents depending on the lender’s requirements.
Property loan interest rates
When it comes to loan against property interest rates, there are two types of rates that you need to be aware of:
Fixed interest Rate
A fixed interest rate remains the same throughout the loan tenure, which means that your monthly EMI payments will also remain fixed. This type of interest rate is ideal for borrowers who want certainty and stability in their loan repayments.
Floating interest rate
A floating interest rate is linked to the market benchmark rate, such as the RBI repo rate or the MCLR. This means that the interest rate can fluctuate based on the market conditions, which in turn can affect your monthly EMI payments.
While a floating interest rate can be risky, it can also be beneficial if the market rates are low. Make sure that you understand the pros and cons of both fixed and floating interest rates before choosing a loan.
LAP interest rates
The loan against property interest rates will vary depending on several factors, such as the lender, loan amount, loan tenure, borrower profile, and so on. Typically, the interest rate for a loan against property ranges between 8.5% to 16%.
To get the best loan against property interest rates, you need to shop around and compare offers from different lenders. Make sure that you read the fine print and understand all the terms and conditions of the loan before signing the agreement.
Conclusion
A loan against property can be a great way to borrow a large amount of money at a lower interest rate, but it is important to understand the eligibility criteria and the key factors that lenders consider while approving the loan. By keeping these factors in mind and ensuring that you have all the necessary documents, you can improve your chances of getting a loan against property that fits your needs and budget.
