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Loan against Property

Loan against Property

Loan against Property is one of the variants of the Personal loans and are secured loans offered by banks and financial institutions using one or more properties owned by you as collateral. Loan against Property is also known as mortgage loan. One can avail these mortgage loans for commercial property or residential property collateral. The property is mortgaged and a fixed percentage of the prevailing market value of the property (normally between 60-70% of the value of the property) is given to the burrower as a loan. Though such a property is mortgaged with the lender, you are still allowed to continue using it for residential or commercial purposes.

These loans are a better option as compared to a personal loan due to the comparatively lower rate of interest charged by the lender. Additionally, unlike gold loans, where the gold ornaments are deposited with the bank and you do not get them back till the loan is paid in full, you can continue using the property used as collateral while you are repaying the loan.

Loans against property or Mortgage Loan area highly preferred form of loans in India, and have much more easily available than ever with the surge in banks and NBFCs providing these loans. Along with being cost-effective, these loans are reasonably convenient to avail and repay due to the relatively low Loans against Property interest rate.

You can avail Mortgage Loan for following Purposes:

  • Expanding your business
  • Getting your child married
  • Funding medical treatments
  • Sending your child for higher studies abroad
  • Funding your dream vacation

Features of Loan against Property (Mortgage Loan)

  • In case of a property loan, financial institutions offer higher loan amount available for longer tenure and at attractive rates as compared to other loan plans.
  • Quick and hassle free process of Loan against property with speedy approvals
  • Residential and commercial properties are accepted as collateral to get loans against property.
  • Mortgage Loans are an excellent debt consolidation tool.
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Description

Some of the several reasons for you to apply loan against property are:

Loan against property is a secured loan which means it is offered only when you offer a property owned by you as security with the bank. Personal loan interest rate is allocated according to the customer’s salary, the amount being borrowed and other criteria as specified by the bank.

  • These are long-term loans and repayment periods can be anything from 10 years to 15 years.
  • The amount you can borrow ranges from Rs. 300,000 to Rs. 1 Crore (lower amounts may also be available).
  • The rate of interest for the loan and the loan amount varies on a case by case basis depending on the type of property and other factors specified by the lender.
  • Banks also bill the applicant for the administrative charges incurred when processing the application such as property valuation and its processing fee.

For salaried individuals, and for professionals and businessmen who are self-employed, the loan against property eligibility requirements in banks or for other institutions are pretty similar.

According to the eligibility criteria to avail Loan against property, you:

  • Must be an Indian national
  • Should be at least 21 years at the time of submission of the loan application
  • Must have been employed by the current organization or should be involved in the current business for a specific number of years
  • Meets the minimum required salary as well as monthly repaying capacity
  • A good credit history with proven track record of timely loan EMI and credit card bill repayment may help secure a lower interest rate and reduce processing times

Depending on whether you are salaried, or a self-employed professional, or a self-employed businessman, banks ask for different set of Loan against Property documents.

The documents required for loan against property are as follow:

Mortgage Loan Documents for Salaried Individuals:

  • Proof of identity and residence proof such as Aadhar Card, Voter ID Card
  • Salary slips for past 3 months
  • Form-16 issued by current employer
  • Bank statements of salary account for the previous six months
  • A cheque covering the administrative costs/processing incurred by the bank in processing the application

Mortgage Loan Documents for Self-employed Business persons:

  • Proof of identity and residence proof
  • Educational qualification certificates, degrees, diplomas, and other academic credentials
  • IT Returns of the three years preceding the one in which loan is applied for
  • Bank statements of six months preceding the one in which loan is applied for

Mortgage Loan Documents for Self-employed Professionals:

  • Identity and Address proof documentation
  • Certificates that prove your academic qualifications/credentials
  • All registration/licensing certificate pertaining to your profession
  • Business existence proof/business profile details
  • Previous 3 years’ balance sheets as well as P&L Statement of the company.
  • Acknowledged Income Tax statements of the company and self for previous 3 years
  • Last 6 months’ bank statement.

Loan against property is a secured loan i.e. the bank keeps the property documents as collateral during the term of the loan. Due to the reduced risk perceived by the bank, the Loan against Property interest rates on offer are quite low and close to the base rate. Currently, the interest rates on loan against property start at as low as 8.60%.

Different banks offer Loans against property with options of fixed interest rate and floating interest rate to applicants to choose from.

Fixed Interest Rate: Fixed interest rate on loan against property remains stable throughout the loan tenure. However different financial institutions levy different interest rates for the Loans against property.

Floating Rate: Floating or adjustable interest rate is not fixed and remains static. This type of interest rate varies according to prevailing market conditions.

Top Banks Mortgage Loan Rates

Loan Against Property Provider Loan Against Property Interest rate
Syndicate Bank 11.50% on wards
State Bank of India 10.30% on wards
Kotak Mahindra Bank 9.80% on wards
Axis Bank 11.35% on wards
ICICI Bank 9.80% on wards
HDFC Ltd. 9.90% on wards
Indiabulls Housing Finance Ltd. 11.50 % on wards
Piramal Capital & Housing Finance 10.00% on wards
LIC Housing Finance Ltd. 11.30% on wards
PNB Housing Finance Ltd. 10.50% on wards
HSBC Bank 9.80% on wards
Canara Bank 11.70% on wards
IIFL 12.50% on wards
Federal Bank 11.85% on wards

 

Difference between Loan against Property and Personal Loan:

  • Personal loan is an unsecured loan on the other hand Loan against property is a secured loan.
  • For personal loan, an individual can take a loan for personal use without any security or guarantor; however, for loan against property, an individual has to mortgage the residential or commercial property.
  • Rate of interest for LAP or Mortgage loan is comparatively much lower than Personal loans.
  • Equated Monthly Installments (EMI) for LAP turns out cheaper; whereas for Personal Loans, an individual has to pay higher EMIs.
  • The sanctioned loan amount for LAP depends upon the value of the property and in case of personal loan; an individual’s income defines the amount of sanctioned loan amount.
  • Loan tenure of mortgage loans is higher as compared to Personal Loan. For LAP, a person gets loan for a maximum of 180 months (15 years) and for Personal Loan, an individual gets loan for 60 months (5 years)
  • Loan against property is an ideal way to employ an idle property to raise required capital rather than resorting to high interest personal loans. Read More…

Arya  E Commerce & Co. 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. Which is why, Arya E Commerce & Co. 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.

The eligibility calculator informs you:

1) Whether you are eligible for Loan against property

2) How much money you can borrow against your property and

3) The terms and conditions of repayment, including interest payoffs and value of each EMI based on the loan tenure.

We suggest you use the calculator to decide which loan option among those available best suits your needs.

There are 2 ways to calculate EMI for loan against property

1: By using the ages old, time consuming, error prone formula i.e. EMI = [P x R (1+R) N]/ [(1+R) N-1]

2: By using Paisa Bazaar’s time saving, simple to use, & reliable EMI calculator

In order to help you determine the loan repayment EMI ahead of time, we have provided our loan against property EMI Calculator. The calculator provides you with the EMI amount you would be required to pay based on criteria such as loan principal, tenure and interest rate provided by you

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