Loan Against Property (LAP), also known as mortgage loan, allows consumers to raise funds by leveraging their residential, commercial or industrial properties. Like unsecured personal loans, Loan against property (LAP) can also be availed for meeting both personal and business needs other than speculative purposes. Banks and HFCs offer loan against property for tenures of up to 20 years.The loan amount for LAP can go up to 75% of the property’s market value, depending on the lender and the credit profile of the borrowers. Many lenders also offer Lease Rental Discounting (LRD) facility, which allows consumers to avail loan by pledging the rental receipts of their tenants.

Features & Benefits of Loan Against Property

Following are the features and benefits of loan against property:

• Lower interest rates - The secured nature of the loan reduces lending risk of banks and NBFCs considerably, thereby, allowing them to offer the loan at lower interest rates.
• No end use restrictions - Loan proceeds can be used for any purpose such as for consolidating multiple high-interest debts, covering costs related to wedding and business expansion, except for any speculative activities.
• Longer loan tenure - Banks and NBFCs offer tenures of up to 20 years on loan against property, resulting in more affordable EMIs.
• Higher loan amount - Lenders usually finance up to 70% of the property value, resulting in higher loan amounts.
• Higher chances of loan approval - The loan is backed by any underlying property, thus, reducing lending risk for banks/NBFCs and increasing borrowers’ odds of availing the loan.
• Overdraft facility - Borrowers can also avail overdraft facility on this loan, giving them higher liquidity at lower interest cost.

Loan Against Property Eligibility Criteria 

The eligibility criteria for availing LAP varies across lenders, below are some general conditions that must be fulfilled to apply for loan against property:

• Residential Status: Resident Indian and Non-resident Indian
• Minimum Age Limit: 18 yearsMaximum Age Limit: 70 years
• Employment Type: Salaried, Self-employed Professional and Self-employed Non-Professional
• Minimum Salary: At least Rs. 12,000 per monthNet Annual Income: At least Rs. 1.5 lakh p.a.
• Work Experience: At least 1 year in the current organization
• LTV Ratio: Up to 75% of property value
• Credit Score: Preferably 750 and above
• Property Type: Residential, Commercial and Industrial properties are eligible to be pledged as collateral. Lenders will also consider the age and condition of the property before accepting the property as collateral

Documents Required For Loan Againts Property 

• Proof of Identity  :(Passport/ Voter ID Card/ Driving License/ PAN Card)
• Proof of Residence : (Ration card/ Telephone Bill/ Electricity Bill/ Rental Agreement/ Passport/ Bank Passbook or Statement/ Driving License)
• Proof of Age : (PAN Card/ Passport/ Any other certificate from a statutory authority)
• Proof of Income for Salaried : (Form 16, Latest Payslips, ITR of past 3 years and investment proofs (if any)
• Proof of Income for Self Employed : (Details of ITR of last 3 years, Balance Sheet and Profit & Loss Account Statement of the Company/Firm, Business License Details and Proof of Business Address)
• Property-related Documents : (Title Deeds including the previous chain of the property documents, Nil Encumbrance Certificate on the concerned property, approved plan [if applicable])

Also Read: Documents Required for Loan Against Property in detail