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How to Avail Loan Against Property In 2021?

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The loan against property (LAP) is a secured loan that you can get by pledging property as security or collateral. These may include commercial, residential, and land properties. Interest rates for the property loans range from 8.00% p.a. Up to 25% p.a. For a maximum tenure of 20 years. Financing up to Rs.25 Crore can be obtained with a loan against properties.

Why Should People Seek These Types of Loans?

This question cannot be answered in one way. There could be many reasons that a person is seeking a loan against property.

To list a few:

  • Any critical medical condition may require a large amount of money for the treatment.
  • For a wedding, or for any other such large-scale event, money is essential.
  • An unexpected death of a beloved person can be a significant reason to obtain a loan for their final rites.
  • Sometimes, extra cash might be needed to buy another property. A loan is a good option in this situation.
  • Few even consider taking a loan against their properties for their children’s higher education.

The Benefits and Features of a Loan Against Property

Lower interest rate: Secured loans typically have lower interest rates than unsecured loans. If you have good credit scores and a strong credit history, your chances of getting a loan with a low interest rate go up.

Easy documentation and approval process: When it comes to these loans, the process of documentation is usually very simple. This is because the collateral acts as the property against which the loan will be granted. This allows lenders to move forward with a simple documentation process.

Flexible loan repayment terms: Many financial institutes offer flexible loan repayment terms. You can get a loan repayment term of up to 20 years depending on the lender you choose.

The property remains the borrower’s property: The ownership of your property is not affected by the loan you are applying for. You can also sell the property if you are unable to repay the loan.

Pre-closure options: If you desire, you can pre-close your loan against real property. Pre-closing a loan with variable interest rates is possible without paying any penalties. If your loan had a fixed interest rate, however, you would need to pay a small amount.

Maximum utilisation of the property: If you take out a loan and have a property as collateral, you can satisfy your financial requirements with the loan amount that is equal to the property. You also retain your property. You have the option to decide not to sell your property, but still get enough money to satisfy your needs at affordable interest rates.

Who is Eligible to Apply for a Loan Against Property?

  • This loan is available to anyone who has been involved in a business or service for at least five years.
  • The applicant must be at minimum 22 years of age at the time they apply.
  • The property must be registered under the name of the individual.
  • The property to be mortgaged should not be in dispute.
  • If the property is owned by more than one person, all parties must be notified and provide written consent.

List of Mandatory Documents

  • Valid ID proof: Aadhaar, PAN, driving licence, voter’s identification card. (Any of the following).
  • Residential address proof: Aadhaar card, driving license, voter’s identity card, electricity bill, telephone bill, rent agreement, water bill, gas passbook, bank’s passbook. (Any one of the following)
  • For a salaried person, proof of income: The last 3 months of the salary slip and company’s offer letter. Also include bank statements for the last year. ITR file of past three fiscal years.
  • Proof of income for a business owner: Trade license, last 3 years of ITR file, statement of the current account of at least 18 months (about 1 and a half years).
  • Proof of income for a self-employed individual: Self-employed individuals like doctors, freelancers, farmers, etc. need to provide an audited financial statement by a CA or any such other entity.
  • Possession of original property documents to be mortgaged.

How to Apply for a Loan Against Your Property?

  • Visit the site of the financial lender of your choice to apply online for the loan.
  • The preferred lending institution will provide a form that should be filled carefully.
  • Enter the bank information where you want your loan amount to be disbursed.
  • The lender’s customer service team will contact the applicant to request the submission of pertinent documents.
  • It may take up to 7 days depending on the lender to verify your property and conduct background checks.
  • If the application is accepted, the amount of the loan will be credited to the customer’s bank account.

Before you apply for a loan, here are some things to remember:

  • Carefully read all loan documents.
  • Compare the EMIs from different lenders.
  • Do not take out a loan that you can’t pay back.
  • Try to limit the duration of your contract. This will save you money over the long-term.
  • Try to foreclose your loan if possible.
  • If applicable, inquire about processing fees and other charges.
  • Ask the lender if they offer insurance for the loan.
  • Do not forget to inquire about rates and foreclosure charges.

Factors That May Affect the Interest Rate on a Loan Against Property

  • The interest rate charged will be higher if the repayment term is long.
  • A good credit score of above 700 can make you eligible for a lower rate of interests on your property loan.
  • The interest rate charged totally depends on the market value and type of the property.
  • The applicant’s age, occupation, and income play a vital role in the determination of rate of interest.

A loan against property could be your best option if you have an urgent need for cash. There are many financial institutions and NBFCs that can lend you money against your equity. You can use an idle asset that has been depreciating overtime to get these loans. This will help ease your financial problem. People often take such loans to fund their businesses and overcome any existing debts.


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