In the real estate and housing finance market today, we regularly come across the term “Home Loan Against Property.” A Loan Against Property (LAP) is a secured loan that you avail by pledging your commercial or residential property as collateral. The security in this type of loan is the property owned by the applicant. The value of your property determines the amount of loan that can be sanctioned.
Types of Property Against Which LAP Can Be Availed:
- Self-owned residential property
- Self-owned and self-occupied residential property
- Self-owned but rented residential property
- Self-owned piece of land
- Self-owned commercial property
- Self-owned but rented commercial property
Common Uses of Loan Against Property
Customers today avail a loan against property for various reasons, including:
- Funding a foreign trip
- Organizing a big wedding
- Financing children’s education
- Business expansion
- Purchasing a new property
- Renovating an existing property
- Loan consolidation
- Balance transfer of an existing home loan/LAP
- Business or working capital requirements
Eligibility and Loan Amount
The value of your property is not the only factor banks consider when deciding loan eligibility. Lending institutions generally sanction loans of approximately 65% of the property’s market value. The tenure for LAP can go up to 15 years, subject to age norms, while the interest rate typically ranges between 12% to 16%.
Financial institutions also assess the applicant’s income details, savings, employment track record, and other financial aspects before disbursing the loan. The property is evaluated based on its current market value to determine the sanctioned loan amount. Having all the required documents ready makes the LAP process much smoother and quicker.
Required Documents for LAP
- KYC documents (age and address proof)
- Income documents
- Property ownership documents
- Bank statements for the previous six months
- A cheque for the processing fee
- Other documents as required by Jessica Fincorp
The Bottom Line
Why do consumers opt for a Loan Against Property when other options are available? The key reason is its lower interest rate compared to personal loans, making it one of the most affordable loan options after home loans. The tenure of up to 15 years makes the EMI more manageable, and it also provides an option to liquidate funds for major expenses. However, the primary risk is that if the borrower fails to repay the loan, the financial institution may take possession of the property. A well-planned approach ensures a smooth repayment process and financial stability.
For more details and customized loan solutions, contact Jessica Fincorp, your trusted financial partner.
