Loan Against Property 2018-01-08T16:32:09+00:00

Apply Loan Against Property

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What is Loan Against Property?

As the name suggest, it is a kind of a loan that is against the security of one’s property and also known as Home Equity Loans. It is designed to meet the financial needs of a person who already owns a house, which is free from any encumbrance which means it is not given as security for any purpose.

Let us put this term into more simple words for you, A loan In other words it actually connotes – a loan given or disbursed against the mortgage of property. One can now take a loan against one’s self occupied residential or commercial property, to expand his business, plan a dream wedding, or fund one’s child’s education and much more. However, one needs to give a declaration stating that these funds will not be used to carry out any illegal activities or for any speculative purpose. The loan is given as a certain percentage of the property’s market value (usually around 40 per cent- 65 per cent). Most lending institutions generally define the threshold amount. Banks, NBFCs and other lenders extend a loan against property as a security, for up to 50 per cent of the market-value of the property.

What are the advantages of Loan against property?

  • As loan against property is a secured loan so the chances are higher of getting it approved fast in comparison to unsecured loans where the risk factor of recovering money in case of a default, is difficult for the banks or financial institutions providing funds.
  • LAP help in serving variety of needs that fall under legal demands. There are not so many barriers to how to utilize the funds when it comes to loan against property. Thus, it has been seen that most of the people borrow it in the situations of huge funding requirement such as education, medical costs, purchasing new house, travel plans, setting up a business, marriage etc.
  • LAP is comparatively cheaper loan if compared to unsecured loans. This loan is an effective way to meet your monetary demands during times of financial need.
  • It provides you Flexible Loan Tenure which means loan duration is longer in this case. It is a good option, with the tenure extending to around 20 years, in case, the amount is high.
  • You get the benefit of paying the loan either through equated monthly instalments or overdraft facility, whichever is suitable. It is the evaluation of the property along with your account history, which confirms the overdraft limit.
  • Most of the LAP tenure is longer i.e. 10 to 30 years or lesser, than other loans. So, a person who go for LAP has to pay smaller EMIs or comfortable EMI routine. If you do not mind a larger outstanding loan amount because of longer loan term, and are comfortable paying in instalments, then LAP is the best choice as a loan type.
  • You can borrow LAP against different property types that means You can take LAP on commercial and residential property. . The property in question must be owned by you so as to get the loan sanctioned. It can be taken on a piece of land you own and even in few cases properties that are under construction.
  • The option to pre-close other types of loans, you can easily prepay the loan against property to clear off the liability sooner than the term decided. But in case the loan was on fixed interest, there is a possibility that you have to pay a prepayment penalty.
  • You can opt for a top-up funding when you take a property loan. It is beneficial if you require additional monetary fix on the said property. Some banks give the facility of taking a top-up loan, even for the home loan

For what purpose you can take loan against property?

It can be used for any purpose other than speculative. You can use it to

  • Fund your child’s education abroad
  • For funding any medical emergency
  • Wedding of your child
  • Funding the dream vacation
  • Business expansion

Eligibility for Loan against property

Eligibility criterion for banks and other institutions are almost same for salaried professionals, self-employed professionals and self-employed businesspersons. According to the criteria, you:

  • Should be an Indian national
  • Should be at least 21 years of age at the time of submitting the loan application
  • Should have been employed by your current organization or been involved in your business for a certain number of years
  • Minimum required salary or monthly repaying capacity
  • Should have submitted EMIs for other loans and made your credit card payments on time for three months prior to submitting the loan application

Top 3 banks eligibility criteria.

SBI loan against property eligibility

  • An individual who is an employee or a professional, self-employed or an income tax assesses or engaged in agricultural and allied activities can apply for SBI Loan Against Property.
  • Monthly Income (salaried) should be in of Rs.12,000/- or Net Annual Income (others) is in excess of Rs.1,50,000/-
  • The income of the spouse may be added if he/she is a co-borrower or a guarantor.
  • Maximum age limit: 60 years

HDFC loan against property eligibility

To meet your business needs, marriage, medical expenses and other personal needs. Transferring your outstanding loan availed from another Bank / Financial Institution.

ICICI loan against property eligibility

ICICI loan against property offers attractive rates for tenure of 15 years. It can be availed for Starting a new business, long term working capital, funding, children’s higher education, repaying your high interest debts

Documents required for Loan against property

Salaried EmployeesSelf Employed/Professionals
Application form with photographApplication form with photograph
Age proof( PAN card,Passport,Any other certificate from statutory Authority)Age Proof(PAN card,Passport,Any other certificate from statutory Authority
Passport,Driving License,Telephone Bill,Ration Card,Any other certificate from statutory Authority- These are residence proves you need.Residence Proof(Passport,Driving License,Telephone Bill, Ration Card, Election Card, Any other Certificate from Statutory Authority)
Education Qualifications-Latest DegreeEducation Qualifications-Latest Degree(for professionals)
Latest Salary-slips for 3 months, Form 16 for last 2 years.Certificate & Proof of business existence along with Business profile
Last 6 months bank statementsTax returns of last 3 years(self and business) with Profit & Loss Account & Balance Sheets duly certified/audited by a Chartered Accountant
Processing Fee Cheque in favour of ‘PNB Housing Finance,Ltd’.Last 12 months Bank Account Statements (self & business)/td>
Photocopy of title Documents of the property, approved plan.Photocopy of Title Documents of the Property, Approved Plan etc.

Note : All documents need self-attestation.

Why Finbucket for Loan against property?

  • Finbucket has collaborated with various public sector and private banks to offer customized loans for its users. Users can easily apply for loan against property online with the help of finbucket.
  • Fibucket helps in calculation of loan and checks for the user’s loan against property eligibility instantly.
  • Instant quotes are offered to the eligible loan applicant as per their profile and with discounted interest rates.
  • Finbucket also allows users to compare the best deal by their own. Users can simply compare the loan offers of various banks at different rates and can choose by their own with which bank they want to go for.
  • Feedback shared by previous successful loan against property applicants acts as a helpful tool for new applicants to get the best loan against deal.
  • An instant e-approval is generated by Fibucket as soon as the user successfully submitted his/her loan against property application
  • All the loan against property applications submitted with Finbucket are sent electronically to the concerned bank department assuring complete privacy and transparency.

How to apply for a loan against property on Finbucket?

In 4 steps you can easily apply for personal loan in no time

  • Firstly, you have to fill a simple application form which will demand your basic personal information given on the site.
  • We already have a coordination with 30+ banks/NBFC to get your application to them.
  • Compare interest rates by your own and choose the best one for you.
  • We will send you an e-approval that your loan application is accepted within 24-48 hours and amount will be credited to your account.
Apply
Fill simple application form

Coordinate
We are coordinating with 30+ banks / NBFCs to get your application.

Rates
We get the best rates for you.

Approval
Loan is approved and amount credited.

Loan against property Interest Rates Table

Bank NameLowest Loan Against Property Interest RatesProcessing Fee
Axis Bank9.40%1.00%
Max Rs.50,000
Citibank9.60%1.25%
Max Rs. 10,000
Indiabulls9.50%0.50%
Min Rs. 5,000 – Max Rs. 10,000
PNB Housing Finance9.75%0.50%
Min Rs. 5,000 – Max Rs. 10,000
Standard Chartered Bank8.50%Max Rs. 10,000
DBS Bank10.50%1.00%
Min Rs. 5,000
Kotak Bank9.75%2.00%
Jammu & Kashmir Bank9.50%1.00%
Min Rs. 10,000
IDBI Bank9.50%0.50%
Max Rs. 10,000
Edelweiss10.00%1.00%
Dena Bank9.95%1.00%
City Union Bank14.75%
Nainital Bank14.75%0.50%
Canara Bank11.45%1.00%
Min Rs. 5,000 – Max Rs. 50,000
United Bank of India10.65%1.00%
Allahabad Bank12.45%0.53%
Min Rs. 2,670- Max Rs. 80,100
Syndicate Bank11.50%0.53%
Min Rs.500
State bank of
mysore
11.75%1.25%
South Indian Bank13.60%0.50%
OBC10.65%0.50%
Karur Vysya Bank11.50%0.50%
Indusland Bank9.65%2.00%
HSBC Bank9.85%1.00%
Min Rs.10,000
DHFL12.00%2.00%
Min Rs. 15,000
Indian Overseas Bank10.60%0.62%
Min Rs. 890 – Max Rs. 8,900
RBL Bank12.80%1.25%
Min Rs. 7,500
United Bank of India11.10%0.50%
HDFC Bank9.60%1.00%
Min Rs. 7,500
Lakshmi Vilas Bank11.70%1.20%
Indian Bank13.80%1.17%
Dhan Laxmi Bank11.58%1.50%
Min Rs. 10,000
Corporation Bank11.20%1.00%
Central Bank of India10.80%0.50%
Max Rs. 20,000
PNB9.90%0.90%
Max Rs. 45,000

Things to keep in mind before taking loan against property

Loan repayment period

This term refers to tenure of your loan over which you will have to repay the loan. Total tenure runs in year/s depending upon the nature of loan. A short-term loan has tenure of 1-3 years, medium term is from 3-5 years and any term more than that falls in the category of Long Term loan.

Hidden costs

You must have read these words in a number of loan brochures and advertisements. Hidden costs are loan related costs that are not disclosed clearly at the time of loan application. But after you avail the loan, additional charges associated with disbursals, processing fee etc that were not discussed with you are charged on your account.

Prepayment penalties

Prepayment penalties are also known as Foreclosure charges. Prepayment or foreclosure is paying off the loan before loan tenure is over. If you have healthy cash flows that are enough to repay the loan, it is but natural to get done with this financial commitment

Residential property

Residential property is a house which is used for dwelling. In other words, a property that is not used for commercial purposes. Even a rented out accommodation used as living space is a residential property for this purpose and not commercial even though it generates income for the owner.

Security

Security simply means that borrower is providing the lending agency with collateral that can be disposed of to clear the loan repayment in case borrower fails to do so.

Processing fee

Processing fee means the fee charged for processing the loan application along with other documents submitted by the borrower. It is usually defined as percentage of loan amount with an upper and lower limit and is clearly mentioned in loan document and application form.

Margin

Margin in case of loan against property if the difference between the Market value of the property and loan sanctioned by the lending agency. A margin safeguards lender’s interest in case there is a downfall in the property prices or where it has to dispose of the property in case of default in payments.

Rate of interest

Rate of interest is the interest to be paid on the principal amount availed and forms part of Equated Monthly Instalments (EMI). The total amount of interest of course comes down as the principal repayment takes place over a period of time.

Stamp Duty

Stamp duty is revenue for government which is paid by the buyer when the property is traded and the same is documented on a Stamp paper. Duty is expressed in terms of percentage of the value at which the property has changed hands.

Mortgage

Usually mortgage and loan against property are referred to as one and the same thing. But there is a thin line of difference between them. Mortgage means providing security to the lender in form of any valuable assets held by the borrower.

Things to keep in mind before taking loan against property

Multiple purposes- the loan against property can be availed for multiple purposes. It could be for business, education, medical needs, property purchase, marriage or any other personal or professional need.

Low processing fee- Most banks charge a low processing fee of 1% of the loan amount sanctioned.

Longer tenure- Loans against property can be taken for tenure periods ranging up to 15 years or more, enabling the borrower gets sufficient time to clear the loan.

Lower interest rates- Loans against property come at lower interest rates compared to normal home loans, where the interest rate can be as high as 20%.

Hassle free-  Banks are willing to provide loans against property without hassles, provided the criteria are met.

Easy repayment- Borrowers can choose from multiple EMI options to choose one which best suits their repayment capacities.

High upper limit- A borrower can avail loans upto Rs 10 crore and more against property, if the property meets the required criteria.

Property Type- Any property type can be kept as security to avail this loan. It could be a residential or commercial property or just an empty plot.

5 Things to Consider Before Taking a Loan against Property

1. Credit Score

Your credit score is the first thing that the banks will evaluate before sanctioning the loan. Based on your CIBIL credit score, the bank will ascertain whether you can repay and if it should provide the loan.

A low CIBIL score, anything below 620, would diminish your chances of securing a LAP. So make sure you have cleared your dues and have a good credit history before applying for a loan. In case you are uncertain about your credit score or have a past history of missed payments or defaults, it is advisable to discuss the same with your case manager first. You may seek counsel from Biz2Credit India, a world-renowned Fin-Tech solutions providing company.

2. Loan to Value Ratio

Generally Loan to Value (LTV) ratio is derived with valuation afresh from external agencies hired by respective lending institutions. In cases where the loan amount is high, lending institutions hire two different agencies for the valuation.

Depending on the nature of your property, here’s the amount you can expect to receive:

  • Residential Property (Self occupied) can fetch up to 75% of the value.
  • SME can get up to 120% ( Eligibility criteria- only cash profits with good accounting ratios)
  • Residential (vacant and let out) up to 60%
  • Wholly commercial properties – up to 65%
  • Industrial Property Commercial Use – Up to 60%
  • Industrial Property Industrial Use (Light machinery, around INR 5 crore) Up to 55%
  • Industrial Property Industrial Use ( Heavy Machinery, above INR 5 crore ) Up to 50%
  • Moreover, self-occupied properties are always preferred. Also note that these are highly competitive prices, available at select institutions. Get in touch with us for more details.

3. Interest Rate & Processing Fees

Make sure you carefully compare the interest rates that various banks have to offer before applying for LAP. This will help you in getting the best deal available for your property. Again, your case manager from a reputed Fin-Tech institution may help you in sorting this out.

Different banks have different interest rates ranging from 10.5 to 14%. LAP is always economical as compared to unsecured loans as they have longer repayment tenure with lesser rate of interest. In case of unsecured or personal loans, the rate often varies between 16 -21 %.

Another thing to keep in mind is that the processing charges of these loans, which vary between 0.25-2% of the loan amount. A token check is taken for filing of loan application with the principal usually ranging from INR 4000 to INR 7500+ along with service tax. These charges are non-refundable, however the same is adjusted in total fee at time of disbursement.

4. Check Your Eligibility

A factor that dramatically impacts your chances of getting the loan is your eligibility status. Factors such as your savings, debt obligations, value of property, financial liabilities and track record of other loan repayments.

5. Flexibility and Terms of Repayment

The level of flexibility and repayment structure of the loan also affect your choice of bank. Opt for a bank with flexible repayment terms, even if that means settling for a slightly more rate of interest. In the long run, the flexibility and the ease offered by financial institution is going to help you more than simply a low rate of interest. You can repay the loan with Equated monthly instalments (EMIs) through Electronic Clearance System (ECS) or Post Dated Cheques (PDC).

Tips for loan with a bad CIBIL score

  • An additional creditworthy co-applicant to your loan application can help you out in a great way, you are giving additional assurance to lending institution’s- applicant with good credit score will add to the comfort level of lending institution. Suppose, if your spouse has a good credit score, you can make him/her your additional co-applicant.
  • Where the CIBIL Score of a borrower is on the borderline i.e. around 650, financial institutions may agree to faq4approve loan. The borrower provides with a Guarantor with good CIBIL score. The liability of a loan guarantor is same as that of a Loan Borrower.
  • LTV denotes how much of the property value a bank can lend to a borrower. 80 percent of LTV indicates that the buyer will have to shell out only 20% of the property value and the rest can be financed through banks. Bad CIBIL score you can seek lower LTV from lending institutions which will make your application more credit worthy.

Some Options for loan with a bad CIBIL score

  • Approach Selected Housing Finance Companies (“HFCs )that offer loans to individuals with low CIBIL scores –There are selected HFCs which can provide mortgage loans to the individuals having marginal CIBIL scores. However, their interest rate is quite high and they may take a longer time to process the loan application.
  • Private Lenders – In many cities you will find private lenders who are willing to lend i.e. loan without CIBIL score. But one needs to be cautious as private money lenders often require borrowers to faq6sign transfer deed for the property in their favour. Some private lenders registers property on their names from gullible borrowers. Private lenders also charge excessive interest rates.
  • Peer to Peer Lending Platforms- These platforms have sophisticated data driven models to evaluate borrower’s credit worthiness rather than base their decision on Cibil Score only.

9 Common Reasons for Loan Rejection

Here are some of the common reasons for loans getting rejected. Although there might be many other reasons, these are major contributing factors:

  • Bad Credit (CIBIL) Score
  • Incomplete or incorrect information
  • Bad investment profile
  • Non-verification of temporary address
  • Previous bad loan
  • Request for change of tenure after approval of application
  • Request for increase in loan amount after approval of application
  • Signatures mismatch in documents and Cheques
  • Discrepancy in co-applicant’s information provided and documents.

7 easy steps to avoid Rejection of Loan against property Application

You can avoid rejection of your loan against property application by following a few steps:

  • Compare and choose the product best suited for your needs and means. If the bank feels you would not be able to pay for the loan you asked for, you’ll not get the loan.
  • Check your eligibility for the chosen product. Do not apply for any and every loan that you might not be eligible for. Too many rejections will reflect badly on your credit history.
  • Try and find out as much information as you can about the loan you are applying for, the interest rates, processing charges, repayment methods etc.
  • Submit all the required documents and cooperate with the verification process. Make sure all the information provided in the application are correct and match with the corresponding documents.
  • Do not agree to become a loan guarantor for anyone.
  • Make sure your credit score remains good – don’t over borrow, pay your bills on time and in full, don’t miss EMI payments, pay your taxes on time, file for returns, don’t take multiple loans and use your credit cards wisely.
  • Check your Credit Report at least 6 months before applying for a loan. If there’s some discrepancy, get it corrected. If the score is not good enough, take measures to make sure that the score gets past 750 for a better chance at loan approval.

Finbucket helps you to find best loan against property

Finbucket’s vast collection of data base allows you to compare loan against property from various banks and financial institutions that offer loan against property in India. It is advisable to check the eligibility criteria before you apply for loan against property because banks follow strict rules when lending money.

Finbucket’s loan against property eligibility calculator is a handy tool that generates easy-to-understand comparison results that take into account differences in T&C (of different banks) and also the fine-print.

Frequently Asked Questions

Get answers to all your questions

1. Can I use the money obtained from Loan against property for business activities?

Yes. You can use the loan obtained by mortgaging your property for business activities as well as for any personal financial distress you might be facing. However, you are not allowed to use the money for any illegal or speculative activities.

2. Who is eligible for Loan against Property?

The Loan against property eligibility criteria vary from one bank to another. However, the common factors that all banks consider are:

  • Your income, savings, debt obligations
  • Cost/value of the property mortgaged
  • Your repayment track record for other loans, credit cards
3. Do I need a co-applicant for this loan?

A co-applicant for loan against property is mandatory only when the property being mortgaged is owned by more than one person. In such as case, all co-owners of the property mandatorily become co-applicants.

4. What do you mean by the market value of a property?

The market value of a property is the estimated value in terms of money that a property can raise if it is sold at prevailing conditions.

5. What types of properties are accepted by lenders providing Loan against property?
Lenders accept various types of property they can be residential (rented out and self-occupied) or commercial use properties. A plot of land without any construction can also be considered as appropriate collateral by the prospective lender.

6. Are only residential properties eligible for loan against property?

No, you can avail a Loan against mortgage of residential/ commercial property owned by you.

7. For how long can I take a loan against property and what interest rate will I be charged?
The tenure of a loan against property usually can be as long as 15 years, with interest rates typically ranging from 12% to 15.75%. Interest rate and tenure period on your loan may vary to a certain extent from one lender to another.

8. Can NRIs avail loans against property?

Yes, several financial institutes offer loans against property to NRIs, subject to verification of all documents.

9. Do banks accept uninsured property to sanction loan against property?

No, in most cases, banks require the property to be insured before approving a loan.

10. Can I prepay my loan against property?
Yes, you can prepay the loan taken against property; however, you would have to abide by certain terms & conditions levied on prepayment of loan by the particular bank.

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