Loan Against Property

Loan (Against Property)

How much I can get?

The eligibility of Loan against Property is calculated on the basis of 2 points either the percentage of property value that you own and how much income you have that you can return the EMI, with. So you can get Loan against property up-to annex % of property value and the net amount that you earn after other EMI, a percentage of that amount can go into the EMI.

Loan against Property is given on below specified properties and the % that you can get loan is listed below.
Residential Property:-
Self Occupied : 65%
Vacant : 55%
Rented :55%
Commercial Property:-
Self Occupied : 50%
Vacant : 40%
Rented : 40%
This varies from Bank to Bank in 5 to 10% of above.
To calculate how much you can pay its looked by most banks in the below mentioned ways
For Salaried:-
{(NTH – Obligation)  60%} / EMI per Lac
For Self-Employed:-
{(NTH – Obligation)  65%} / EMI per Lac

Whichever is lower from the value of the property or your income- that loan amount will be given to you.
The other criteria are-Max. Age:-

For Salaried: 60 Yrs.  & For Self-Employed: 70 Yrs.

Banks Up-to 30 lacs 30 to 75 lacs 75 lacs & above Processing fees
HDFC 12.75% 12.75% 12.75% 1%+ service Tax
Ing vysya 12% to 13% 12% to 13% 12% to 13% 1%
ICICI Bank 12.05% 12.05% 12.05% 1% + service tax
Axis Bank 13% 13% 13% 1%
India Bulls 12.50% 12.50% 12.50% 1%+service Tax
Fullerton 15.5% 15.5% 15.5% 1% of the loan amount

Features at Glance

  • Loans from Rs: 2 Lakh onwards depending on your needs
  • Borrow up-to 70% of market value of the property
  • Flexibility to choose b/w an EMI based loan or an overdraft
  • High tenure loans for ease of re-payment.
  • Attractive interest rates.
  • Simple and speedy processing.
  • Loan for salaried & self-employed individuals

Advantages of taking a Loan (Against Property)

  • More cheaper than Personal Loans: It works out to be much cheaper than a personal loans, which is usually issued at interest rates in the region of 16 per cent-21 per cent.
  • Longer Loan Tenure: The tenure for a Loan (Against Property) is usually longer than that for a personal loan. Generally, (LAP) is given for a maximum tenure of 10 yrs.
  • Lower EMI: Since the interest rate is lower, many times, (LAP) Equated Monthly Installments (EMI) turn out to be cheaper than those under personal loans.
  • Simple documentation and quick Approvals: (LAP) being a secured Loan has comparatively faster approvals and minimal documentation.

Loan (Against Property) can be taken for following purposes:

  • Expanding your business
  • Get your child married
  • Send your child for higher studies
  • Fund your dream vacation
  • Fund Medical Treatments

In nutshell, Loan (Against Property) is a secured multipurpose loan with larger tenor and lesser interest rate.

Important Points for Loan Against property

(Loan against Property) refers to the secured loan category such as home loan where the borrower gives a 100% guarantee by using his property as a security. The right of proprietorship of the property is still with the borrower, and if he / she is unable to repay the loan amount, he / she can sell the property to pay off the debts.

Typically these loans are used to start or expand business or to renovate your home. But it can also be used to re-pay existing high rate loans.

  • The maximum loan amount varies from bank to bank. It may start from Rs.2 lacs up-to Rs.100 lacs. The correct amount depends on your property valuation, income and of course re-payment capacity.
  • The rate of interest is usually (6.5% )+, but depending on one’s profile and the Bank’s ethics, it may vary.
  • The maximum loan amount can come up-to (50%) of property value for commercial setups and up-to (60%) for residential properties.
  • The maximum loan tenure is 15 yrs.
  • You require collateral, security or guarantors for obtaining a Loan (Against Property).
  • Most banks don’t accept properties that are on lease or that are based on power of attorney.
  • The maximum age limit of eligibility is 60 yrs.
  • You can choose either Fixed or Floating interest rate. You also have an option / choice of changing from Fixed to Floating interest rates and vice versa once every yr.
  • A processing fee is usually (0.05% to 3%) of the loan amount and is payable up-front. This fee however will be deducted from the disbursal amount payable to you. You should always ask for the 0% processing fee or negotiate the processing fees.
  • You pay your loan in ( EMIs) through post-dated cheques or through ECS to debit your Bank account through (ECS) with the (EMI) amount.
  • You can also prepay the entire loan outstanding any time after 180 days of availing the loan. Pre-payment charges will be taxed accordingly. If you intend to do so, please ask for the pre-payment amount to be waived or a reduction in the penalty charges.
  • You can also increase or improve your loan, loan against property eligibility. For that you need to show income of at least 3 persons, most preferably a family member or a business partner.

Also know / grasp these pointers before availing a (LAP):

  • Decide on the basis of what you actually / really need. You can also see if the cost fits into your estimated / calculable budget.
  • Compare the quotations given and interest rates from (3 to 4) banks, select the one which offers max benefit and serves your purpose.
  • Also determine the tenancy of the loan. The (EMI) may come less for longer tenancy, but the total interest outgo will be higher.
  • Know all about processing fees & time. Some banks may waive the processing fee for processing loan but they build this cost on their interest rates.
  • Consider pre-payment options. All banks charges (2% to 3%) of the loan in case you decide to pre-pay the outstanding amount.
  • Default in payments results in penalties. It can also adversely affect your credit history & profile. So you make sure to make your payments on time.
  • Make sure that each one deals and offers agreed upon are supported by applicable papers. So make sure you always ask for a letter in a banks letter head mentioning the likes of, exact interest rate, process fees, prepayment charges along with interest schedule.
  • Before signing any documents, make sure you re-check all terms & conditions.
  • Do not at any circumstance give any wrong information. This may amount to fraud & could land you in trouble.
  • Do not sign any blank documents. Even if it takes you a few min to fill the form, please do so. Do not leave anything for the executive to fill up.
  • Finally, once you received a loan do your best to pay it back as quickly as possible Banks make their money off the interest they charge and the sooner you pay back a loan the less money you’ll have to pay in interest.

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