A loan against property is a secured loan offered against a property pledged as collateral. The property is mortgaged to the lender till the borrower completes the repayment of the loan sanctioned against it.
There are certain documents required for a loan against property, and if they are furnished appropriately, then there isn’t much hassle involved in the disbursement of the finance.
Here, we will mainly focus on the list of documents needed to apply for a loan against property along with the other significant aspects related to the option.
Principal Features of A LAP
A LAP can be considered as one of the best options to capitalise on the financial worth of your property. The financing option can be availed to meet some personal requirement, for your business, for higher education purposes, etc. Loans against property do not come with any end-use restrictions.
Lenders generally consider 60-70% of the property value as the loan. The property remains mortgaged to the financial institution until full repayment. Note that the property you place as collateral should be free from all sorts of litigations.
What is the Loan Against Property Eligibility Criteria?
The eligibility criteria for a loan against property vary from one financial institution to another, but in general, it depends on the income profile of the applicant. Here are the two genres of borrowers eligible to apply for a LAP –
- Self-employed – The individual must be a regular taxpayer by filing income tax returns.
- Salaried individuals – The individual must be a permanent employee with a government or a well-established private company.
Documents needed to Apply for a Loan Against Property
The documents required for a loan against property are solely based on the income profile of the applicant. Here is a complete overview of the documents needed to apply for finance against your property.
- Application form and KYC documents for Primary Borrower and co-borrower(s)
- Salaried individual –
- Application form with photo.
- Identity Proof and PAN Card, mandatory.
- Residential Address proof in the form of an Aadhaar card, passport, voter ID card, registered rent agreement, landline bill, driving license, bank statement or passbook. You may also need to provide utility bills of the last 3 months.
- Self-employed – All the above documents required by a salaried individual along with an office address proof, such as ownership, or lease, or rent agreement, or a utility bill.
- Property Documents for LAP required by both salaried and self-Employed Individual
- Registered Sale Deed, or Lease Deed, or Conveyance.
- Past sale deeds chain comprising each of the transactions related to the property since it was allotted for the first time.
- Latest utility bill.
- Latest House tax return or receipt.
- Income-related Documents:
- Salaried Individual –
- Form 16 of the last 3 years, salary slip for the previous 6 months, last 6 months bank account statement representing salary credited to the account.
- Self- employed –
- Business profile
- Certificate and proof towards the existence of business
- Income Tax returns of the last 3 years for self and business, balance sheets audited or certified by a Chartered Accountant, profit and loss account, bank account statement for self and business for last 12 months.
There are several reputed NBFCs offering loans against properties, and Bajaj Finserv is one of them providing high-value loan up to Rs. 3.5 Crore to self-employed and up to Rs. 1 Crore to salaried individuals at affordable interest rates. You need to pay the nominal processing charges for a loan against property, and the rest is a rather straightforward affair.
Property types Against which a LAP can be Availed
- Self-owned and self-occupied residential property
- Self-owned residential property
- Self-owned but rented residential property
- Self-owned piece of land
- Self-owned but rented commercial property
- Self-owned commercial property
The main reason behind the growing popularity of loans against property is the affordable interest rates, comparatively lower than on other unsecured and secured loans as well. Thus, loan against property stands out to be the most pocket-friendly deal. A longer tenor makes it more comfortable for the borrower to pay the comparatively lower EMIs.