Loan Against Property
Loan against property (LAP), are basically loans provided by the Financial Institutions against the security of properties. LAP is designed to meet the financial needs of someone who already owns a house or multiple properties so as to borrow funds against their assets. It is important to remember that the property which you are putting up for your loan should be free any encumbrance (i.e. it is not given as security for any purpose or any other mortgaged with any Institution).
Banks and Non-Banking Financial Companies (NBFC) provide LAP for both Salaried as well as Self-Employed individuals. The rate of interest (ROI) and loan amount determined based on your property value and your annual income.
Financial Institutions always want to consider the risks prior to loan sanction. Therefore whenever, you apply for loan against property, there are certain factors that banks consider with respect to your property to mitigate the risks in sanctioning the loan. The rate of interest, and loan amount are determined based on these factors called loan assessment criteria. You can get a LAP of up to 70% of the market value of your property depending on the lender’s policy and the property type and valuation. The ongoing market value of the property would obtain by a process called a valuation which is conducted by the Loan Provider or by its approved vendor.
Application for LAP can be for various reasons but the same has to be validated during the loan process. Some of the common ones are your child’s wedding, loans for new business ventures, second home, vacations, medical treatment just to name a few.
Loan Against Property (LAP) – Eligibility Criteria
General eligibility Criteria for a Loan against Property (LAP) are as follows:
- Age (min. 21 years and Maximum 60 years)
- Property Valuation
- Existing Liabilities (if any)
- Current Work Experience
- Income and Financial Documents
- Number of Dependents
The eligibility for LAP is calculated on basis of both the percentage of property value that you own and the amount of income you have to enable you to return the EMI on the Loan. So you can get Loan against property up to a certain percentage of the property value and the net of your monthly earning after deducting any ongoing loan EMI.
Loan against Property is given on the following types of properties and the percentage criteria are as follows:
Loan Against Property – For a Residential Property
- Self-Occupied –70% of Property Value
- Rented or Vacant – 60-65% of Property Value
Loan Against Property – For a Commercial Property
- Self-Occupied – 60-65% of Property Value
- Rented or Vacant – 55-60% of Property Value
Apart from that, you can also get LAP against Vacant Plot, Self-occupied Industrial properties.
- Other eligibility criteria revolves around the maximum age of the applicants
- For Salaried employees – 55 Years
- For Self-Employed – 60 Years