Know-How to Apply for Loan Against Property and Its Eligibility Criteria

A Loan Against Property or LAP, as revealed by its name, is a loan that can be taken against an individual’s owned and occupied immovable residential or commercial property or rented residential property. The purpose of this loan is usually related to certain sudden large expenses arising from medical procedures, higher education, wedding, travel, and so on, or to refinance an existing loan. Let us directly see how to apply for Loan Against Property and its eligibility criteria:

1. Apply to a bank or lender for a LAP by filling in the LAP form. The documents typically needed are as follows:
   1. The applicant’s identity and address proofs, such as Aadhar, PAN, voter’s ID card, passport, driver’s license, etc.
      
      
   2. The documents for the property to be mortgaged, such as sales deed, ownership proof, municipality tax certificates, registration document, lease agreement, insurance, etc.
      
      
   3. The applicant’s income proof in the form of salary slips, IT returns, bank statements for at least a period of the preceding three years
      
      
2. These documents affect one’s Loan Against Property eligibility criteria as do the following factors:
   1. The borrower’s age is significant as a LAP usually tends to have a mid to long term tenor (ranging between a year and 20 years). The younger the applicant, the better is their Loan Against Property interest rate, tenor, and sum disbursed.
      
      
   2. The eligibility is also determined by the number of dependents and size of the family, other earning members, and educational qualification of each family member matter significantly in their eligibility
      
      
   3. A borrower’s Credit or CIBIL score is determined by their borrowing and repayment history, payment defaults (if any), punctuality in clearing of credit card outstanding dues, past or existing loan/EMI repayment trend, and so on. A score of at least 700 is considered optimum
      
      
   4. One of the most important factors is their income level and how stable it is. Better income levels with stability translate into higher LAP eligibility. Also, the type of profession is of equal importance as a person with an MNC or a government job is considered to have a more stable income and employment than anybody else. A self-employed person with a history of owning a profitable venture is also considered eligible.
      
      
   5. The factor which is of utmost importance in Loan Against Property eligibility criteria is the current available market value of the property being mortgaged. It directly determines the loan sum sanctioned. The better the current actual valuation of the property in concern, the higher will be the borrower’s LAP eligibility. Usually, lenders approve a loan sum of a value which is 60% of the current market value of the property used as collateral.
      
      
   6. The diversification in one’s investment portfolio affects their LAP eligibility. It is prudent to diversify a greater proportion of funds in stable and less risky options such as PPF, government bonds, debt funds, than in riskier options like equity. Within equity, investing in large cap and mid cap is less risky than investing in small cap.
      
      
3. Once the LAP application is reviewed and verified to a lender’s satisfaction, it is approved and the sum disbursed to the applicant.

As you must have realized, a LAP has its own benefits over and above other loans in the market, as follows:

1. Being a secured loan, it makes available a far lower rate of interest in comparison with that of a personal or business loan.
   
   
2. A LAP borrower is allowed to continue to occupy their mortgaged property without any objection from the lender.
   
   
3. This type of loan has the characteristic of being repaid over the long term which is not available with a personal loan. This helps ease the burden of the EMI on the borrower, spreading it across many more years.

There are different types of Loan Against Property based on the needs of the borrower and their profile. Here are some of the types:

1. A LAP for the salaried or self-employed person facilitates a larger disbursal sum and lower interest rate, making this an attractive option. Anyone employed in a private or public business or an MNC or in a government job can apply for the salaried option or those with a successful business for the self-employed option, provided they fulfil their other eligibility criteria as specified above.
   
   
2. It is also used to meet the educational expenses and covers transportation, tuition fees, accommodation, food, and other such expenses of the student
   
   
3. It can be taken by a person getting married or for a family member to cover wedding costs, or to upgrade one’s property, renovate, and repair it.
4. It can be used for the balance transfer of an existing loan to another lender.
   
   
5. Lease rental discounting is used to take a loan against one’s monthly rental income.
   
   
6. Doctors can take a LAP to upgrade their medical facilities and equipment.
   
   
7. CAs can also take a LAP for the purpose of their accountancy business and/or any other purpose.

Now that you know how to apply for a Loan Against Property, don’t wait!