Property is one of the most valuable assets that you can have, especially because it can serve as a source of liquidity when you are in urgent need of funds. If you feel overwhelmed by several unexpected expenses, you do not need to sell the property. There’s a better way to raise the needed funds.
You can simply pledge your property to obtain a loan against property that enables you to easily cover big-ticket expenses. To take a loan against property in India, you must own either a residential or commercial property. The amount taken from your lender can cover expenses, such as higher education fees, business expansion, debt consolidation, and many more.
Taking a loan against property also comes with some exquisite benefits. However, you must be eligible for the loan and its benefits. How do you determine your loan eligibility, you wonder? Not to worry, read on to learn more.
Benefits of a Loan Against Property
Here are three benefits of a loan against property that will interest you.
Minimal Documentation Required
Say goodbye to heavy paperwork which makes the application process quite difficult. For a loan against property, lenders only require a few documents from you and this simplifies the application process, especially since you need the funds urgently. These documents help them to confirm that you have a legitimate means of repaying the desired amount.
If the lenders are satisfied, you must get approval for your loan, and then you will submit the required documents, including the property papers, to receive the loan payout.
Availability of Flexible Tenors
As a salary earner, professional employed or self-employed individual, you can choose the tenor that suits you the most. Salaried individuals can choose from 2-20 years while self-employed individuals and professionals get 18 years maximum. However, the tenor varies among lenders.
Balance Transfer Option
If you’re not satisfied with your current lender’s policies, especially the interest rate, you are allowed to negotiate with them. If the negotiations fail to yield a positive outcome, you can opt for a balance transfer of your loan to another lender.
Loan Against Property (LAP) Eligibility Criteria
Below is a list of the loan against property eligibility criteria for resident salaried earners, self-employed individuals, professionals, and non-resident Indians (NRIs).
Age: You must be aged between 21 years and 70 years.
Maximum Loan Eligibility: You can get up to Rs.10 crores.
Loan Tenor: You can get a tenor of up to 20 years.
Minimum Income Eligibility Criteria:
Salaried individuals: Rs.30,000 per month.
● Self-employed individuals Rs.3,50,000 per annum.
● Non-Resident Indian (NRI)– 26,000 USD per annum.
Interest Rates: This starts from 8.00% upward.
Eligible Property: A vacant, self-occupied, residential, commercial, or industrial property.
Minimum Work Experience: Salaried earners must have work experience of up to 3 years.
Minimum Business Stability for Self-Employed Individuals: 5 years.
Loan to Value (LTV) ratio:
The LTV ratio is the percentage of the property value.
● Residential – 55% -70%
● Commercial – 50% -60%
● Industrial – 40% – 50%
Fixed Obligation to Income Ratio (FOIR)
● Salaried – 60% of net income monthly.
● Self-Employed – 65%-70% of the net profit.
Credit Score: A credit score of 725 and above.
Documents Needed to Apply for a Loan Against Property
Below is a list of the documents required to process your loan against property application:
● Current salary slips
● Permanent Account Number (PAN) which serves as a proof of identity
● A recent utility bill that serves as a proof of address
● Bank statements from 3 months ago
● A copy of your property documents
● Income Tax Returns
Lenders may request that you submit additional documents in person.
How to Increase Your Loan Against Property Eligibility
You can increase your eligibility for a loan against property by doing the following:
● Ensure that you include a co-applicant with high earnings in your loan application.
● Ensure that your source of income is properly documented.
● Foreclose your unsecured loans like personal loans.
● Pay your credit card debts.
Remember to study your preferred lender’s eligibility criteria before applying.
How to Check Your Loan Against Property (LAP) Eligibility?
You can check your loan against property eligibility with the LAP loan eligibility calculator. This is an online financial planning tool that provides you with accurate information quickly. It is free to use and is found on the lender’s website.
What is the Interest Rate on Loan Against Property?
Lenders typically charge applicants between 8.00% to 10.00%. However, note that the eventual loan against property interest rate that the lender offers you is based on your eligibility.