Loan Against Property

Purchasing a house is an indicator of our financial stability. Experts believe that the pursuit of buying a house ends up restricting the buyer’s financial ability. However, very few experts tell that the house can be utilized in a wise manner. This blog posts try to shed light on how you can use your house to achieve your desired financial goals.

Loan against Property

Loan against Property (LAP) can be defined as a form of secured loan received from a bank or a financial institution by mortgaging one’s existing property. LAP can be used for meeting requirements for such as launching a new business venture, its expansion, pursuing higher education, medical expenses, working capital requirements etc.

LAP, which can be applied individually or jointly with other persons or legal entity, can be taken as term loan with fixed EMI or as an overdraft facility. As an OD, LAP gives the much needed flexibility by helping meet the fluctuating requirements of capital in a business. While LAP has no upper cap on the amount of loan to be applied, the amount is ascertained by the banks as per the market value of property and repayment capacity of the applicant. The loan to value ratio normally tends to vary from 45-90% of the property’s market value and can be availed against residential, industrial and commercial property including a warehouse or a land parcel.

We will show how one can avail a LAP

Eligibility  :   Eligibility for the loan is decided on criteria such as age, income etc. The eligibility can be ascertained by checking the same or by visiting the bank’s website.

Choose the right lender    : One can choose one’s lender by comparing fundamental parameters like interest rates, application fees, processing fees and legal charges of different banks.

Application : On selecting the lender, the applicant has to fill the application form providing information about financial assets and liabilities; property details and other personal and professional details.

Documentation : LAP applicants are mainly for the self-employed segment and necessary documents are needed for income assessment.

Checking CIBIL score : The credit history of the applicant is checked through CIBIL score. The CIBIL score goes a long way in whether the customer receives the loan or not.

Technical and Legal clearance : Before approving the loan, the property documents are legally authenticated as the same acts as the security against the loan. Second is the valuation of the property determining the loan amount to be given as collateral.

Issue of Sanction letter : After the credit appraisal, the sanction letter is issued to borrower giving details like loan tenure, repayment options and rate of interest which has to be duly accepted and sent back to the lender.

Disbursal : At the end of all the above procedures, the loan amount is disbursed with the assurance that the same will be repaid within a stipulated timeframe. Businesses can use this loan instrument to make the most of their respective business ventures.

Choose the right loan for yourself.

Borrowing from a bank or a financial institution is perhaps one of the longest commitments to keep and a systematic approach to buying a loan is thus imperative. Choosing the right home is important but equally important is deciding upon the best loan for your requirement.

In this post, we have attempted to demystify the types of loans to aid you in decision making. The information outlined here will assist you in seeking the right loan for the right purpose.

A home loan can be availed by consumers for purchasing a house – a ready apartment or under construction property. The amount, the interest and tenor of the loan is decided as per the policies of the lender, price of property and the individual’s annual income. The borrower also stands to benefit from the loan with regards to income tax.

 Land or Plot loan:

Now, building one’s own home is not a dream as one can own a piece of land or a plot as a thoughtful investment. You can shield yourself from the rising prices of property. Special land/plot loans come handy in such scenarios. There are, however, only a handful of institutions that provide loans for financing this kind of purchase.

Home construction loans:

Most Indians prefer to procure a plot and design their own independent homes; loans for construction of houses are therefore becoming quite popular. Home construction loans available in the market are varied in nature, giving consumers a range of choices whether to build a whole new house or to finance the construction of a newly acquired home.

Composite loan:

A unique product where the lender finances both the purchase of a plot as well as the construction of your house. The housing finance company will not only provide you with a loan for the plot you chose to buy, but will also take care of the construction costs.

 Loan against property (LAP):

Your property is a valuable asset; you can utilise this property to procure loans for any other important need or emergency like acquiring another asset, business expansion, etc. in this type of loan, the borrower uses the equity of his or her home as collateral. Any residential or commercial property can be kept as collateral for LAP, provided the borrower is the title holder of the said asset.

Home improvement loans:

Bored of seeing the same kitchen, living room, and bathroom or just wish to enhance the aesthetic appeal of your property? Then a Home improvement loan is a clever choice. One can opt for this type of loan for repairs, remodelling of kitchen, bathroom, terrace, installation of energy saving equipment or general improvements on an existing property.

Every lender’s policies on each type of loan vary in terms of eligibility, maximum loan amount, maximum tenure and terms of acquiring the loan. You may be required to do a comprehensive analysis on these aspects before taking the final decision.