What is Loan Against Property
Loan against Property falls under the category of Secured Loan. The owner can raise funds from the bank by mortgaging his/her property with the bank. The amount of loan given is a certain percentage of the market value. The borrower has to deposit his ownership documents with bank, which is released once the loan is fully repaid.
The rate of interest for LAP is far cheaper compared to a simple unsecured personal/business loan.
This is a long term loan which reduces the EMI significantly as compared to short term personal/business loan which attracts higher interest & lower tenure of 3 to 4 years.
There are basically two types of Loan against Property:
1) Loan against Residential Property
2) Loan against Commercial Property
What are the End Uses of this loan?
- Buying another property
- Business expansion
- Repayment of more expensive short term loans
- Individual needs like Marriage, Education, Vacation, Medical expenses etc.
Basic Product Features
|Loan Amount||Minimum 10 lacs to Maximum 50 Crs.|
|Tenure||Minimum 1 year to maximum 15 years.|
Minimum age of 21 to maximum age of 58 or 60
Minimum age of 21 to maximum age of 65
a)For Self-Occupied Residential Property
b)For Rented Out Residential Property
Funding ranges from 55 to 65% of Market Value calculated by the Bank.
Funding ranges from 50 to 55% of Market Value calculated by the Bank.
|Maximum Funding for Commercial Property||Generally it is 50% of Market Value calculated by the bank|
|Rate of Interest||Presently ranges from 13 to 14% reducing. The rate of interest varies from bank to bank & also depends on the credit rating of each proposal.
First & foremost, all banks check the CIBIL score. This is more like an elimination or screening process today. CIBIL stands for Credit Information Bureau of India Ltd. The CIBIL score indicates the past credit history of the borrower. CIBIL report throws light on the borrower's repayment history related to credit cards, bank loans like Personal/Home/Auto/Mortgage loan etc. Every bank requires the borrower to possess a satisfactory CIBIL score for processing the loan application.
The past 3 year financial performance is evaluated. The Credit team looks at the Turnover, Net Profit, Outstanding liabilities, latest Debtors & Creditors etc. They try to estimate the future business & expansion plans as well.
A personal interaction with the borrower at his/her office premises is conducted by the Credit Manager, which in banking parlance is called “Personal Discussion” or “PD”.
The assets & savings of the borrower is another factor.
The banking transactions over a period of one year are crucial. Banks look for clean & healthy regular transactions.
|Processing Fees||The processing fee varies from bank to bank. Most bank charge an upfront fee along with the application. The balance fee is collected at the time of disbursement. It may also be deducted from the loan amount at the time of disbursement.|
|Stamp duty||Stamp duty of 0.2% of the loan amount is charged for the loan agreement between the borrower & the bank.
In case of registered mortgage, banks charge 0.5% of the loan amount.
|Legal & Search Charges||Amount varies from bank to bank. Some banks do not charge|
|Valuation Charges||Amount varies from bank to bank. Some banks do not charge|
|Insurance||Banks try to insure the loan by tying a life insurance and/or property insurance with the loan. The one time insurance premium depends on the age & loan amount. This amount is generally added to the loan amount.|
|Pre-EMI||The banks may ask for a Pre-emi cheque depending on the date of disbursement & the EMI cycle.|
|Prepayment charges & Foreclosure charges||These charges are still applicable to LAP though it has been waived off for Home Loans.
Banks allow upto 25% of outstanding principal to be repaid every financial year. A penalty of 2% is applicable if the prepayment exceeds 25%.
Foreclosure charges vary from bank to bank.
|Documentation charges||Nominal documentation charges may apply which will be communicated at the time of agreement signing|
Banks and Financial Institutions Offering Loan Against Property
We deal with the MNC, Private Sector, Nationalized & Co-operative Banks in India. We also facilitate lending from NBFCs. We do not arrange for Private Finance.
Areas of Operation
The professional consultancy fees applicable will be communicated by a “ Letter of Mandate” which will outline the terms & conditions. The work on the proposal starts once the “Letter of Mandate” is formally accepted by the client.
Loan Documentations Requirement
Click the links below for the list of documents :