A loan against property enables individuals to fulfil their financial needs and expenses by keeping their property as a mortgage. The property can be the borrower’s house, land, or other commercial assets. The lender will hold that asset until the repayment of the loan. When it comes to loan against land property, the individuals can pledge their land property as collateral.
What is a loan against land property?
It is an amount of credit offered by the financier to the borrower by keeping land as a mortgage. Since this is a secured loan, the land property is the security, which the lender can sell in case the borrower fails to repay the loan amount.
Therefore, borrowers must remember that they might lose their right over the mortgaged asset if they miss the mark of repaying loans.
Simple Steps to Get Loan Against Property
Here are the following steps to get approval of a loan against property quickly. They are:
Step 1: Fill out the application form
Step 2: Confirm all the details
Step 3: Submit the necessary documents
Step 4: Wait until the documents are verified
Step 5: Receive a sanction letter from the lender
Step 6: Evaluation of property
Step 7: Receive funds in the account
Documents required for a loan against property
Here are the following documents required to apply for borrowing a loan against property:
- ID proof (includes PAN Card, Aadhaar Card, Voter ID Card, Passport, and Driving Licence)
- Address Proof (includes electricity bill, rental agreement, ration card)
- Age proof (PAN Card, Passport)
- Bank Statements (last 6 months)
- Documents of the mortgaged property
- Income Tax Returns for last 3 years
Eligibility criteria for a loan against property
Following are the eligibility criteria while applying for a loan against property:
- Age Limit of individuals should be between 22 to 70 years.
- An individual must be salaried, associated with an MNC or self-employed.
- A CIBIL score of 685 or above is ideal for getting quick loan approval.
Features of loan against land property
Some of the key features of a loan against land property are:
- Simple eligibility criteria
Since these loans are offered against the owned land of the borrower, their eligibility criteria are quite basic. An individual associated with an MNC, public, or private company with proper income and decent credit score can easily apply for this loan.
- Lower interest rate
Being secured, a loan against property bears low risk while providing property mortgage loans. As a result, these loans have a lesser interest rate than unsecured loans. Nevertheless, this loan offers fast and timely repayments.
- High loan amount and longer repayment tenor
LAP offers an extensive loan amount up to Rs. 5 crore to the borrowers alongside 75% of the property value pledged as collateral. Moreover, there is repayment tenor of up to 20 years, making repayment instalments reasonable.
- Easy documentation and fast processing
While talking about mortgage loans, the nature of paperwork and documentation is quite simple. Nevertheless, LAP request has a quicker approval rate than home loans as the asset previously exists, and it is easier to determine its market value. Further, the collateral property makes it easier for the lender to execute the lending process.
Financial institutions offer pre-approved loan offers that expedite the lending process. They provide these offers on various financial products like home loan, loan against property and more. Applicants can check their pre-approved offer by inserting details like their names and contact numbers.
- Pre-closure advantages
Loan against land property charges no penalty while making prepayment, except while issuing on fixed interests. Hence, a borrower can lessen the burden of his/her overall interest and tenancy by repaying the money in small lots on a daily basis. If necessary, they can go through the five easy steps for prepaying their loan against property.
Points to consider while borrowing a property mortgage loan
Lenders offer the loan amount after mortgaging the land property of the borrower at a reasonable interest rate. Here are five steps that a loanee should consider before availing of this loan:
- Borrow from a reputed financial situation
- Choose affordable loan repayment tenure
- Stay connected with the applicant and regarding submission of important documents
- Make timely repayments
- Avail insurance while borrowing a large amount
- Go through the terms and conditions thoroughly
Applying for a loan against land property can seem complex to individuals doing it for the first time. A borrower needs to know four things before applying for a LAP. Also, they are recommended to borrow only an amount they can repay and not take any sort of financial burden upon themselves.