Loan Against Property

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LOAN AGAINST PROPERTY

Loan against property (LAP), are loans provided by banks against the security of one’s own property. LAP is designed to meet the financial needs of an individual who already owns a house or multiple properties so as to help them to get the best out of their assets.

It is important to remember that the property which you are putting up for your loan should not be given as security for any purpose or any other loan.

Banks provide LAP for both Salaried as well as Self-Employed individuals. The rates and loan amounts differ based on your property and your annual income.

Banks would want to consider all risks to mitigate them. These factors determine your rate of interest, and loan amount. You can get a LAP of up to 80% of the registered value of your property which depends on the Bank’s policy and the type of property and valuation. The value of the property would be determined through a valuation conducted by the Loan Provider.

How To Apply For Loan Against Property

  1. Application
  2. Processing
  3. Documentation
  4. Property Verification/Valuation
  5. Sanctioning of the Loan
  6. Disbursement

Unsecured Dropline Overdraft

Dropline overdraft is a facility in which you can overdraw your current account up to an agreed limit. Overdraft is an efficient form of borrowing as you pay interest only for the time you use the money. It offers flexibility. You can at any time deposit money into the account to reduce the outstanding balance or can draw out money whenever you need it as long as you do not exceed the limit. Interest is calculated daily on the fluctuating outstanding balance and is normally charged at the end of each month.

Who Can Apply:

  • Self Employed (Private Ltd. Co. and Partnership Firms)
  • Self Employed (Individuals)
  • Self Employed (Private Ltd. Co. and Partnership Firms) include private companies and partnership firms in the business of manufacturing, trading or services

With:

  • Minimum turnover of Rs. 60 lakhs, financial should be audited.
  • Years in business: Minimum of 3 years in current business and 5 years’ total business experience
  • Business must be profit making for the last 2 years.
  • Minimum Annual Income (ITR): Rs. 1.5 lakh p.a.

Documents required:

  • PAN Card
  • Address proof (ration card, telephone/ electricity bill/ lease agreement/ passport/trade license /sales tax certificate)
  • Bank statement (latest of 6 months)
  • Last 2 years ITRs (computation of income) balance sheet and profit & loss a/c. and Financial should be audited.
  • Proof of continuation (ITR/ Trade license /Establishment /Sales Tax certificate)
  • Self Employed (Individuals) include Sole proprietors, Partners & Directors.

Loan Against Property Eligibility Criteria

Eligibility Criteria when applying for a Loan Against Property Are as Follows :

  • Income
  • Age (min. 21 years)
  • Property Valuation
  • Existing Liabilities (if any)
  • Current Work Experience
  • Financial Documents
  • Number of Dependants

The eligibility for LAP is calculated on basis of either the percentage of property value that you own or 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 annex % of property value and the net amount that you earn after other EMI has been deducted from your net income Loan against Property is given on the below mentioned property types and the percentage of loan you can get is given below:

Loan Against Property – For a Residential Property

  • Self Occupied

    65% of Property Value

  • Vacant

    55% of Property Value

  • Rented

    55% of Property Value

Loan Against Property – For a Commercial Property

  • Self Occupied

    50% of Property Value

  • Vacant

    40% of Property Value

  • Rented

    40% of Property Value

  • This varies from Bank to Bank by

    – 10% of the above mentioned percentages.

In order to calculate how much you would be estimated to pay, most banks use a formula which is given below.

Loan Against Property for Salaried Individuals: -

{(NTH – Obligation) * 60%} / EMI per Lac

Loan Against Property for Self Employed Individuals: -

{(NTH – Obligation) * 65%} / EMI per Lac Whichever is lower from the value of the property or your income- that loan amount will be given to you.

Other Eligibility Criteria Revolves Around the Maximum Age of the Person Applying for The Loan

For Salaried employees – 60 Years

For Self-Employed – 70 Years

Loan against Property Tips:

  1. The maximum loan amount varies from bank to bank and could range from Rs.2 lakhs up to Rs.100 lakhs. The loan amount depends on the property valuation, your income and of-course your repayment capacity.
  2. The maximum loan amount can come up to 80% to 100% of property value for commercial setups and up to 80% for residential properties (This is really variable as it completely depends on the valuation of your property).
  3. The maximum loan tenure in Loan Against Property cases is 15 years.
  4. Be ready to provide security, collateral or guarantors in order to obtain a Loan Against Property, not to mention a long verification process.
  5. Most banks do not accept properties that are on lease or that are based on power of attorney.
  6. The maximum age limit of eligibility is 60 years.
  7. Loan Against Property features Fixed or Floating interest rates. You also have an option of changing from Fixed to Floating interest rates and vice versa once every year.
  8. You can also prepay the entire loan outstanding anytime after 180 days of availing the loan. Pre-payment charges will be levied accordingly. If you intend to do so, please ask for the pre-payment amount to be waived or a reduction in the penalty charges.
  9. You can also increase or enhance your loan against property eligibility. For that you need to show income of at least three persons, most preferably a family member or a business partner.