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Loan against property: What you must know
BankBazaar.com | March 05, 2009
You may have a lot on your mind when it comes to
sending your children for education abroad or maybe
finance your business or even finance your child's
wedding. The first thing that would come into the mind
of most of us is, 'Where would I get the money from?'
There are many ways you could arrange for money,
and one of those ways is taking a loan. You could
take a personal loan for the amount required, or you could take a loan against
your property.
What is a loan against property?
A loan against property (LAP) is exactly what the name implies -- a loan given or
disbursed against the mortgage of property. The loan is given as a certain
percentage of the property's market value, usually around 40 per cent to 60 per
cent.
Loan against property belongs to the secured loan category where the borrower
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gives a guarantee by using his property as security.
What purposes can I take a loan against property for?
Loan against Property can be taken for following purposes:
Expanding your business
Getting your son/daughter married
Sending your son/daughter for higher studies abroad
Funding your dream vacation
Funding medical treatments
What kind of properties can I mortgage for a loan?
You can normally take a loan against your self-occupied or rented residential
property. This could be a house or even a piece of land.
What are the eligibility criteria to get a loan against property?
This criteria will vary from one bank to another. However, from all the host of factors, the common factors that
all banks look at are:
Your income, savings, debt obligations
Cost/value of the property mortgaged
Your repayment track record for other loans, credit cards, etc.
What are the normal interest rates and tenure for repayment offered for a loan against property?
Interest rates on loan against property range from 12 per cent to 15.75 per cent, and the loan tenure can be up
to 15 years.
How is a loan against property different from a personal loan?
Loan Against Property Personal Loan
The individual takes the loan by
mortgaging the house property
An individual can take a personal loan for personal
use without any security or guarantor
One of the cheapest retail loans after
home loans; usually about 12%-16%
Higher interest rates compared to LAP; usually
issued at interest rates in the range of 16%-21%
Since the rate of interest is lower,
frequently LAP Equated Monthly
Installments (EMI) turn out cheaper
Since rate of interest is high, Equated Monthly
Installments (EMI) for personal loans are high
Maximum loan eligibility is determined
primarily by the value of the property and
income
Maximum loan eligibility is determined primarily by
an individual's income
Maximum loan tenure for LAP is up to 15
years (180 months)
Maximum loan tenure for personal loan is up to 5
years (60 months)
Secured loan Unsecured loan
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What documents are required for applying for a loan against property?
Most banks and financial institutions typically require the following documents. However, this list may vary
from bank to bank.

Salaried Customers Self Employed Professionals Self Employed Businessman
Application form with
photograph
Application form with
photograph
Application form with
photograph
Identity and Residence
Proof
Identity and Residence Proof Identity and Residence Proof
Latest Salary-slips Education Qualifications
Certificate and Proof of
business existence
Education Qualifications
Certificate and Proof of business
existence
Form 16 Last 3 years Income Tax
returns (self and business)
Last 3 years Profit /Loss and
Balance Sheet
Business profile
Last 3 years Profit /Loss and
Balance Sheet
Last 3 years Income Tax returns
(self and business)
Last 6 months bank
statements
Last 6 months bank statements Last 6 months bank statements
(self and business)
Processing fee cheque Processing fee cheque Processing fee cheque
A loan against property is one of the best ways to raise money. The only disadvantage of such a loan is that if
the borrower is not able to pay the loan fully, the bank or the financial institution can take possession of the
mortgaged property. Base your decision on your repaying capabilities.
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online for your personal loan, home loan and credit card needs from India's leading banks and NBFCs.
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