Loan against property (LAP) is a valuable financing facility for individuals and business entities, allowing them to leverage commercial or residential property. Mortgage a building, land, factory, shop, or apartment to secure a loan against property. Renowned lenders allow collateralising alternate assets also, like nursing homes, guest houses, farmhouses, hotels, schools or colleges, etc. The loan can be utilised to cover several expenses, including home improvement, business expansion, or investments.
Borrowers need to meet the eligibility for a loan against property. The loan can be repaid in simple Equated Monthly Instalments (EMIs) during a repayment tenure.
Determining Eligibility for a Loan Against Property
When evaluating eligibility, lenders consider various factors. These include the following:
- Work Profile
Traders, manufacturers, service providers, business personnel, and self-employed professionals can apply for a loan against property. Borrowers should have at least three years of experience in the existing business.
- Income
A higher income indicates a higher debt repayment capability of the borrower, thereby reducing the risk rate for the lender. It increases the chances of obtaining a loan against property at more favourable interest rates. There is no predefined monthly income for a loan against property by renowned lenders, making it an easy financing option.
- Age
The age limit to secure a loan against property is 25 – 75 years.
*Younger candidates are more likely to be eligible for longer tenures.
- CIBIL Score
Considering other aspects of loan eligibility, the lender can accept or reject any loan application. However, a higher credit score expedites loan approval. Generally, most lenders consider a credit score above 700 sound and acceptable as a secured loan. Loan against property or home mortgage loan interest rates can be more favourable for borrowers with a high credit score.
- Property Title and Insurance
There should not be any previous loans, liens or litigations on the collateralised property. Also, the property must be insured against fire and other hazards.
- Documentation
Loan applicants must be able to produce the required documents as per the lender’s policy. A loan against property document requirement is as follows:
– A PAN (Permanent Account Number) Card is a mandatory document.
– Provide a complete chain of property-related documents.
– Identity Proof – Passport/ Driving License/ Aadhar Card/ Voter ID Card or other Photo ID issued by the government
– Address Proof – Utility Bill/ Driving License/ Aadhar Card/ Voter ID Card/ Lease or Rent Agreement/ Registry/ Property Tax Receipt/
– Business Proof – Partnership deed, Practice certificate, Trade licence, registration certificate issued by RBI (Reserve Bank of India) or SEBI (Securities Exchange Board of India), Sales Tax/ Excise/ VAT/ Service Tax
– Income Proof – Previous three years’ Income Tax Returns (ITR), Income Statement, Profit and Loss Statement, balance sheet, and 6 months’ bank statement
Financial stability, repayment capability, credit score, age factor, occupation, and property type are the primary factors that lenders consider. By meeting the eligibility requirements and producing the necessary documentation, borrowers needing substantial funds can obtain loans with the benefit of flexible tenure.
