A loan against property is a feature that allows an individual to borrow money from the bank against the asset pledged as collateral. The asset can either be an apartment/house or any self-owned commercial space. A loan against property (LAP) is also known as a secured loan. Here, the amount sanctioned as a loan depends on the value of the collateral provided by the borrower. The loan against property interest rate is comparatively lower than personal loans which eventually attract more individuals to opt for this.
Who is eligible for a loan against property?
Any individual, who is either salaried or self-employed with a stable proof of income, and falls between the age group of 28-60 years, qualify for a loan against property. Also, a loan against property one can take for various reasons. It could be anything under the roof from revamping an old property to financing your kid’s wedding, to expanding the business ventures. The tenure for LAP could be up to 15 years while the loan against property interest rate may vary between 8% – 18%.
Also, a stable income proof, employment record or any other savings with the current valuation of the collateral pledged by the borrower. It is calculated thoroughly before sanctioning the desired loan amount. It’s also important for the individual to know that only up to 65% of the asset value is provided by lenders as a loan.
What are the factors affecting loans against property interest rates?
An individual to know all about the factors that may affect the loan against property interest rates before approaching any financial institute or lender.
An individual, who desires to avail loan against property at attractively lower interest must have a credit score of 700 or above. It is also important that one keeps their tenure flexibly long because the longer the repayment tenure, the lower the interest rates charged. Depending on the market value of the property, an individual may avail a loan amount ranging between Rs. 10 lakhs to Rs. 7.5 crores.
Loan against property interest rate (floating)
|Benchmark Rate||Employment Type||Rate of Interest (p.a.)|
|Salaried reference rate||salaried||8.25% to 15%|
|Self-employed reference rate||self-employed||8.5% to 18%|
What are the pros and cons of Loans against the property?
A loan against property comes in handy in case of emergencies. Whether an individual is in urgent need of a loan to finance their child’s education or to renovate an existing residential property. A loan against property can be the one-stop solution. It allows the borrower to continue owning the property until the full loan amount is repaid. While securely utilising the locked-up value of the asset.
Pros of loan against property
A loan against property is easily available to customers and also many banks sanction this kind of loan real quick. Because in return the lenders get the assurance of the loan repaying capacity. It is a great way for any borrower to meet their financial needs as LAPs comes with added flexibility as well. Above all, the borrower can also avail of lucrative tax benefits and discounts against the interest amount for a loan against property. Also, the documentation and approval processes are less time-consuming. It comes with pre-qualified top-up loans and quite a flexible repayment plan.
Cons of loan against property
The value of one’s asset pledged as collateral may differ from bank to bank. As each & every bank has its own sets of rules and parameters to check the current valuation of the property. Also, if at any point, the borrower fails to make the repayment within the given time frame, then he/she may lose all the authority over property pledged against the LAP.
Other factors to keep in mind while applying for LAP
The interest rates depend on the location and type (commercial/residential) of the property. The better the location, the more likely you are to avail lucrative loan amount. Upto 70% of the value of the property at lower interest rates.
It is always advisable to do your research before applying for a loan against a property. It makes for quite a budget-friendly and economical type of loan. And it is the second-most favourite kind of loan by the people of India.