Loan against property (LAP) is more of a secured loan. You can use your property as a security/collateral and avail a loan against it. The amount received as a loan can be used for a wide variety of tasks like arranging a vacation, expansion of a business, buying a property, children's higher education and much more.
Banks sanction loans against commercial as well as residential properties. The type of properties that qualify for a loan against property includes Plot of Land, self-occupied property, rented property and vacant property.
The loan availed against your property can be repaid by way of equated monthly installments (EMIs). Loan against properties can be taken for a period of 1-15 years. If we compare LAP against personal loans, loan against properties are granted for a longer tenure when compared to personal loans. Personal loans are unsecured and charge a higher rate of interest.
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Loan Against Property Interest Rates:
Features and Benefits of Loan Against Property:
- As LAP is a secured loan, it is offered only as a loan against residential property or against commercial property, with the property being a security to the lender.
- There is no minimum/maximum amount for a loan against property. The amount can be a minimum of a Lakh to a few Crores. You can get 40-60% of the market value of the property, as loan against property.
- The Interest rates depend on the type of property and various other factors. Interest rates are much lower, compared to personal loans.
- This loan can be availed for multiple purposes, including, for personal or professional need, marriage, property purchase, medical related needs, education, or even for a business.
- There are loan processing fees of 0.5-1% of the loan amount.
- These loans can be taken for a time period that can go up to 15 years or more.
- Documentation is really simple as most of the paperwork is done at the time of buying the property. All you require is a clear marketable title, with the property having no encumbrances.
- The loan amount you get also depends on the city in which the property is located.
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Interest rates on Loan against Property:
- Banks charge lower rates of interest on loan against properties, compared to personal loans. As the rate of interest is lower, equated monthly installments (EMIs) becomes cheaper on loan against property when compared to personal loans.
- Banks charge differential rates of interest depending on the type of properties. Currently, the interest rate on loan against property ranges from 12-16% a year. Banks also charge a nominal amount of 1-2% of the total loan amount as a processing fee.
- You can pay EMIs in the following ways. You could use SI (Standard Instruction) for the EMIs to get deducted automatically from your bank account. You can use SI if you have a salary account or any bank account with this bank. If you don’t have a bank account with this bank, use ECS (Electronic Clearing Services) where EMIs are paid automatically. You could also submit post-dated cheques.
See Also: BBMP Property Tax
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