Loans Against Property – Key Questions/Answers

Loans Against Property – Key Questions/Answers
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It can be a tricky situation when funds are needed but you are not able to decide how to procure them. Whether to take a loan or break an investment and if take a loan then which type of loan. Also the reason funds are required plays an important role along with the amount. Though availing a loan against property has become easier than before but still the big question is always there that “From where would I get it and how?”

But before you get on this question there is another question that most people ignore that what type of loan do they need. If you are looking to finance your child’s education or marriage or you need funds for business expansion, going for the unsecured loan (personal/business loan) is not always the option. You can also avail loan against property.

Here are a few key questions with regards to loan against property:


1. What is LAP?:


As the name suggests, it is a loan availed against a property. Loan given under this category is mostly 50-60% value of the mortgaged property. It can be availed by any person whether salaried or self-employed.

2. What properties are eligible?:


The property can be a self-occupied or rented residential house property, vacant land, commercial building, or lease property. Though provided that the documents should be with the person applying for a loan.

3. Purpose of Loan against Property:


The loan against property can be availed for business expansion, financing your child’s education even for abroad studies, for a vacation, for medical, and for the marriage of your son or daughter.

4. Eligibility criteria for LAP:


The overall eligibility criteria may vary from bank to bank, however, the standard criteria are:

• Salary to be at least Rs. 40,000/pm and for self-employed income to be Rs. 3 lakhs/p.a

• Calculation of Fixed obligation to income ratio which considers existing EMIs, rent and proposed EMI.

• Value of mortgage property

• Credit score of the applicant

5. Tax exemptions for LAP borrowers:


In case the loan is availed for business expansion then the business owner can take complete exemption of interest if he can prove that funds were used for the said purpose. However, if the loan is availed by a salaried person then there is no tax exemption available.

6. The tenure and interest:


LAP can be availed for a maximum of 15 years and its rate of interest varies between 8.80% to 14.50%.

7. Documents required:


The documents required for availing loan against the property for self-employed are:

• Application Form along with a photograph

• Address and Identity proof

• Business proof and education qualification(in case of professional)

• Last 3 years ITR, Balance Sheet, and Profit & Loss Statement

• Last 6 months bank statement plus cheque of processing fee.

For salaried individual documents required are:

• Application Form with Photo

• Identity and Address proof

• Salary slips last 3-6 months

• Form 16

• Last 6 months bank statement

• A cheque for processing fee

Additional Reading:- Top Benefits of Taking Loan Against Property

Hopefully the answers to above stated questions would have solved most the queries and doubts you might had about loan against property. Low interest and longer tenure make a loan against property a preferable choice. Pre-payment of the loan generally carries no charges in this loan category.

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