Loan against property (LAP), are basically loans provided by banks against the security of one’s own property. LAP is designed to meet the financial needs of someone who already owns a house or multiple properties so as to get the best out of their assets. Its important to remember that the property which you are putting up for your loan should be free any encumbrance (i.e. it is not given as security for any purpose or any other loan).
Banks provide LAP for both Salaried as well as Self-Employed individuals. The rates and loan amounts differ based on your property and your annual income.
Banks will always want to consider all risks, which is why while you are applying for your loan against property, there are certain factors the bank considers with respect to your property to mitigate its risks in giving out the loan. These factors determine your rate of interest, and loan amount. You can get a LAP of up to 80% of the registered value of your property depending on the Bank’s policy and the property type and valuation. The value of the property would be determined through a valuation conducted by the Loan Provider.
Individuals apply for LAP for a variety of reasons. Some of the common ones are your childs wedding, loans for new business ventures, second homes, vacations, medical treatment just to name a few.
What kind of processing fee do you need to pay for Loan Against Property?
A nominal fees and charges are to be paid to the Bank depending upon their term and conditions.
How much time does the bank take to disburse the loan?
The processing of the loans usually takes 7 to 10 working days once all the documents are submitted. It also depends upon your profile and documentation.
How is interest charged on Loan Against Property?
Some financial institutions make LAP available only under the floating rate. Fixed rate loans are off limits. Borrowers need to enquire before finalising a LAP from lending institutions.
It is normally available for residential properties only, but can be available for commercial property also.
Does the property have to be insured?
Yes the property has to be insured against fire, flood, earthquakes and other appropriate hazards during the tenor of the loan.
How can I repay my loan?
The repayment of loan is done through Equated Monthly Instalments. It can be paid through Post Dated Cheques (PDC) or Electronic Clearance System (ECS).
Can I pre-pay my loan?
The loan against property can be pre-paid along with the pre-payment charges. Usually the bank charges 2% of the principal pre-paid.