If you own a residential or commercial property, and you have an urgent need of funds, you can apply for a loan against property (LAP). It is sanctioned against your asset, which is pledged as collateral. It can either be a land, house or a commercial property owned by you. The asset remains as collateral until and unless the complete amount of the loan against property is paid back by you.
The purpose of an LAP can be anything, like:
- Business Needs(business expansion, start of a new business)
- Child’s Education (higher studies, study abroad, professional courses)
- Wedding Expenses
- Urgent Medical Emergency
How to Qualify for Loan Against Property
The banks or NBFCs go through a certain process before sanctioning your loan. Before you apply loan against property, you must know whether you are eligible for it. Here are the main eligibility criteria.
Salaried Individuals
- Must be an Indian national residing in India.
- The age limit for the primary applicant must not be less than 28 years and not more than 60 years.
- The applicant must have a proven income of minimum Rs 7000 per month.
- There are multiple interest rates offered by the financial institutions starting from 10.35%. It depends on your credit history, tenure for LAP, and the type of property pledged as collateral.
Self-Employed Individuals
- Must be an Indian national residing in India.
- Age limit for self-employed individual must be between 28 years to 70 years
- Low interest rates on commercial properties.
Co-Applicant
- Banks provide better interest rates if a woman like your mother or wife is added as a co-applicant
- Woman co-applicant can get lower interest rates
- The co-applicant may or may not be an earning individual
- Adding an earning co-applicant increases eligibility
- The age limit for the co-applicant (salaries or self-employed) is 18-65 years.
Documents Required for LAP
When you apply for a loan against property, there is a set regulation of documentation. There are certain documents and proofs the bank will ask for before sanctioning your loan. Here is the list of such documents required by you.
Salaried Individuals
- Application form (completely filled and signed)
- Residence Proof (KYC documents) such as:
- Aadhar Card,
- PAN Card,
- Voter ID Card,
- Job card issued by NREGA
- Or as may be specified by the financial institution
- Proof of income such as:
- Last 2 months salary slip,
- Latest Form 16,
- Three months bank statement
- Documents of property pledged as collateral
Self-Employed Individuals
- Application form (fully filled and signed)
- Proof of Residence (KYC documents) such as:
- Aadhar card,
- PAN card,
- Voter ID card,
- Job card issued by NREGA,
- Or as may be specified by the financial institution
- Proof of income such as:
- Latest 2 income returns,
- Latest 2 years P&L accounts and B/S (with schedules),
- Six-months bank statement
- Documents of the property pledged as collateral
Self-Employed Non-Individuals
- Application form (fully filled and signed)
- Proof of Residence (KYC documents) such as:
- PAN card,
- Copy of GST registration,
- AOA,
- MOA of company
- Or as may be specified by the financial institution
- Proof of income such as:
- Latest 2 income returns,
- Latest 2 years P&L accounts and B/S (with schedules),
- Six-months bank statement
- Documents of the property pledged as collateral
The demand for loan against property is increasing more than personal or business loans because:
- It has a lower interest rate as compared to personal loans.
- You are still in charge of the asset pledged as collateral.
- You can avail LAP for multiple purposes.
Often people confuse home construction loan with loan against property. While a home construction loan is taken for building, renovating, or expanding your home, a loan against property is taken to meet business or personal expenses.
