Life is unpredictable, and things sometimes happen differently than planned. Such situations often bring financial requirements that we were not prepared for. However, there is a solution to sail through these times without jerks.
If you own a property, you can borrow a loan against it to get funds for its value without liquidating it permanently. You can use or apply for property loan for personal reasons like financing a wedding, medical emergency, home renovation, education, foreign vacation, or buying a new car or property. These loans often come with lower interest rates.
The lower interest rates of a Loan Against Property (LAP) can be an excellent funding option for self-employed professionals and business owners to invest in business expansion.
Whether you borrow a LAP for personal or professional reasons, you can unlock the value of your property to cover your expenses. Here is a complete guide on how to secure a Loan Against Property.
What is a Loan Against Property?
A LAP or Loan Against Property is a secured loan you can borrow from a financial institution against a property as collateral. That means the loan provider will hold the pledged property’s ownership until you repay the entire principal with interest. It is a highly useful type of loan when you need funds in an emergency. That is because the loan amount is substantially high according to the property’s value, and the interest rate on a Loan Against Property is lower than credit card or other unsecured funding options.
Benefits of a Loan Against Property
A Loan Against Property provides several benefits that increase its demand among aspiring borrowers. These include the following:
- Faster Approval:
Since these are secured loans with minimal risk of default, lending institutions often approve them quickly without unnecessary checks and verifications.
- Ample Loan Amount:
LAP is a secured loan. That means the lenders can sell your property to get their money back if you default. Therefore, your loan amount largely depends on the property’s fair market value. Many loan providers offer as much as 75% of the property’s value as a LAP.
- Lower Interest Rates:
The interest rate on a Loan Against Property is lower than unsecured loans like Personal Loans due to the lower risk involved for the lender.
- Longer Repayment Tenure:
A LAP usually comes with a bigger amount, so its repayment tenure is longer than other loan options. You can use an EMI calculator to choose a loan term, making EMIs better manageable.
- Freedom of Usage:
The amount you borrow against a property has free usage for any personal or business purpose. Other secured loans do not offer such kind of freedom.
- Hassle-Free Processing:
The process of obtaining a property loan is hassle-free and quick, without unnecessary documents and formalities.
- Right to Use the Property:
Even if you pledge the property as collateral against the loan you borrow, you don’t need to vacate it. You can continue occupying the property as usual as long as you repay the EMIs on time.
Preparing for a LAP Application
Are you planning to apply for a Loan Against Property? Take these steps to streamline the process:
Plan:
Planning the loan application is a crucial step to take. Identify your loan requirement and decide the loan amount you can easily repay on time. A sensible repayment plan that fits your financial situation is also necessary.
Research:
Compare LAP deals from different lending institutions to grab one that best fits your requirements. Do extensive research to select a lender offering a reasonable Loan Against Property interest rate with a flexible repayment plan.
Fulfil the Eligibility Criteria:
After choosing a suitable loan plan, check the eligibility criteria to make arrangements required for application and qualification. For instance, many loan companies only provide mortgage loans to self-employed individuals and business owners, excluding salaried employees.
Prepare the Documents:
If you are eligible, check the lender’s documentation requirements to prepare for the loan application. Gather the necessary documents before applying so you don’t end up running around looking for them when the lender demands them. Some common documents required are identity proof, address proof, signature proof, proof of business existence, income proof, and collateral property-related documents.
Stepwise Process to Obtain a Loan Against Property
Speaking of the simple LAP process, let’s look at the steps involved:
- Visit your selected lender’s website and complete an online loan application form with accurate data. These include your personal, professional, and financial details. Any error or discrepancy in the information provided causes loan rejection.
- Once you successfully submit your loan application form, a lender’s representative will call you to verify your property details. They may also perform a preliminary check to confirm the property’s eligibility for a Loan Against Property.
- After application and evaluation, the next step is to submit the required documents to support your provided information. These include your PAN card, Aadhaar card, passport, property registry copy, property tax receipt, trade license, banker’s verification, ITRs, balance sheet, business continuity proof, and documents related to the property.
- Once you provide all the details and documents, the lender will begin the verification process by conducting a background check on your property. They will also check your credit score, income regularity, financial position, etc. They perform these checks to confirm your eligibility for a Loan Against Property.
- After successful verification, the lenders will contact you to finalise the loan terms, including the loan amount, interest rate, repayment scheme, etc. Once you finalise them and accept the loan offer, the lender will approve the loan and transfer the loan amount to your bank account. You can use this money for any personal or business-related expense you want according to your requirement.
Conclusion
A Loan Against Property is an excellent funding option for urgent or planned expenses. Speedy application, quick approval, and ample loan amounts make them perfect for fulfilling your crucial requirements. The best thing is that Loan Against Property comes at a lower interest rate, making repayment easily manageable without putting undue stress on your finances.