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About Loan against Property by IndianMoney.com

What is a Loan against Property?
A loan against property is a loan taken against your house, apartment or a plot. It's cheaper than
that of a personal loan or loan against security. The house can be pledged even if you stay in it
or give it on rent.
The right of ownership of the property is still with the borrower, and if he/she is unable to repay
the loan amount, he/she can sell the property to pay off the debts as property generally
appreciates with time. In other words it actually means - a loan given or disbursed against the
mortgage of property.
Usually, banks and other lenders extend a loan against property as a security, for up to 50-60
per cent of the market-value of the property. However, the extent of the loan is also subject to
your eligibility as per income norms. It is available for both salaried and self-employed persons
and against commercial as well as residential property.
The minimum quantum of loan sanctioned is around INR 2-3 Lakhs. The maximum quantum of
loan sanctioned can be around 2-5 Crores.



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Things to Know:
Application process: Steps involved in the application process are:
Application
Processing
Documentation
Sanctioning of the loan
Valuation and legal check
Disbursement of loan
Eligibility:
The banks / FIs will decide the loan amount based on your repayment capacity. Repayment
capacity takes into consideration factors such as income, age, qualifications, number of
dependants, spouse's income, assets, liabilities, stability and continuity of occupation and
savings history.
However the eligibility of loan shall not exceed 50-60% of the cost of property in majority of
cases.
Age: These kinds of loans are generally sanctioned for borrowers of a minimum age of 21-24
years and the maximum age can be around 60 years for a salaried employee at the time of
maturity of the loan. For the self employed the maximum age can be 65 years of age.
Income: For salaried employees banks demand an identity as well as a residence proof, 6
months bank statements, salary slip or form 16, copy of the property documents. Self employed
businessmen need to present 3 years financial statements in addition to the above.
Some banks demand a minimum work experience of 1-5 years for salaried employees and the
self employed individual needs to be in business for at least 2-5 years.
Credit History: Past credit history plays a very important role in getting the loan against
property sanctioned. The Cibil score plays a very important part and if the borrowers past credit
history is poor the loan is liable to get rejected.

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Banks insist on an encumbrance certificate which is proof that the pledged property is free from
monetary and legal liabilities. The title of the property needs to be clear.
Who can be a co-applicant to the loan?
You can include your spouse as a co-applicant to the Loan. His / her income can be added to
enhance the loan amount. If there is more than one owner to the property all of them need to
be joint applicants to avail the loan.
For what tenure can these loans be availed?
The tenure of the loan depends on bank to bank. The tenure of repayment of these loans is 1-10
years which can be extended to 15 years.
What is the interest rate charged for such loans?
Interest rates on a floating basis for a loan taken against property are in the range of 12-14% per
annum. The fixed interest rate loans are in the range of 12-16% per annum.
Can a loan against property be prepaid?
Yes, this kind of a loan can be prepaid. The prepayment charges are in the range of 2-3% of the
outstanding principal if the loan is prepaid between 6 months to 5 years.
Does the property need to be insured?
The property needs to be insured for fire and other hazards as per the requirement of the
banks.
What are the benefits of availing a loan against property?
Sudden need for money can be catered by applying for a loan against property.
Such expenses could be a Marriage, funding for education expenses, medical expenses etc.



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The lower rate of interest makes a loan against property an attractive option when compared to
a personal loan. Only a home loan has a lower rate of interest than a loan against property.
The tenure of repayment of a personal loan can be 1-5 years when compared to a loan against
property which is 1-10 years. The longer tenure aids in more comfortable repayment.
The processing time of a loan against property is lesser than that of a home loan as the property
already exists.
Many a time the cost of land or a residential apartment appreciates with time. This opportunity
can be used to refinance the loan against property. i.e Apply for a loan from other sources in
order to pay off the existing dues
If one has more than one property lying idle a loan against property can be availed against it.

Buying tips:
Compare Loan Against Property offered by different banks and select the one which best suits
your purpose in terms of competitive interest rates.
Keep ready all documents related to the title of the property as well as the ration card or an
electricity bill to show proof of ownership. Pan card, Voters card or a passport can be used as an
identity proof.
Certain banks do not specify an upper limit and sanction the loans at 50-60% of the value of the
property whatever it might be.
You have to bear the stamp duty on the loan documents to be executed.
You can enhance your loan against property eligibility by showing the income of at least three
persons, most preferably a family member or a business partner.
Note the exact rate of interest, processing fees, pre-payment charges along with interest-
schedule, when you decide to finalize your loan with a particular bank.



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