Loan Against Property: 5 Things You Need To Know

By Author: Neha Sharma
Total Articles: 170
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Businesses need funds for their growth and expansion at all times. In case a business is not eligible for a business loan but they own property, another option they have is a loan against property. This type of loan is also an option for homeowners who are looking for funds.

Loan against property is a type of loan in which any property is put up as collateral. This is a secured loan. Since a property is put up as collateral, the loan amount under such loans is quite high.

If you’re looking to take a property loan, here are some things you should know:

1. Unconditional loan:
A property loan is like a personal loan with a lower rate of interest. Since this loan is secured, it is lower risk for the banks and thus commands a lower intererst rate. However, loan against property is an unconditional loan. What this means is that the lender does not put any conditions on the final use of the funds. These funds can be used for any purpose, whether personal or business.

2. Documents required:
Lenders require the following documents for the purpose of a loan against property:

• Property ...
... ownership papers
• Income proof (income tax returns, salary slips, bank statements for the past 6 months)
• Address proof (Passport, Voter ID, Aadhar Card, Electricity bill, Telephone Bill, Gas bill, ration card, Property documents)
• Identity proof (PAN card, Voter ID, Drivers License, Passport, Aadhar Card)

With these documents, you need to fill up the form for property loan. In case of a business that is looking out for a commercial property loan, then the income documents need to include the accounts and financials of the business.

3. Eligibility criteria:
Most lenders specify a minimum age of the applicant which ranges from 21 years to 25 years. The maximum age of the loan applicant is between 65 years to 70 years. This means the loan applicant must not reach the maximum age when the loan is outstanding. Both salaried and self employed people are eligible to apply for this loan. Since this is a secured loan, the lender has an element of comfort. However, while scrutinizing the loan application, the lender will be sure to conduct proper due diligence of the loan applicant’s ability to repay the loan.

4. Loan amount:
The loan against property is a secured loan. The value of the loan depends on the value of the property that is mortgaged to the lender. Most lenders will lend between 50% to 70% of the market value of the property. This means it is possible to get quite a high loan amount for such types of loans.

5. No tax benefits:
A home loan is eligible for interest and principal repayment tax benefits. Even though a property loan is a secured loan, it has no tax benefits. However, the purpose for which the loan amount has been used is important. If a commercial property loan is taken to invest and grow the business, then the interest can be charged as an expense.

Author Bio: Neha Sharma is a finance student who loves to write in her free time. She has spent considerable time researching about loan against property. Through her work, she lists down facts about LAP