LAP - Loan Against Property Explained in Detail - IIFL Finance Blogs

Jan 01, 2018 6:45 IST 2082 reads,

It’s All in the Name: Loan Against Property (LAP)

In the real estate and housing finance market today, we regularly come across the term “Home Loan Against Property”. Loan against property is nothing but a loan which you avail by keeping your commercial/residential property as a collateral. Another name for Loan against property is a secured loan. The security in this kind of loan is the property owned by the person applying for the loan. The value of your property decides the amount of potential loan you will be sanctioned.

The types of Property against which LAP can be availed:

  • Self-owned residential property
  • Self-owned and self-occupied residential property
  • Self-owned but rented residential property
  • Self-owned piece of land
  • Self-owned commercial property
  • Self-owned but rented commercial property

Customers today avail loan against a property for numerous reasons. It could be anything from a foreign trip, big wedding, education of your children, or simply to expand your business. Purchasing a new property, renovating existing property, loan consolidation, balance transfer of existing HE/LAP and business or working capital requirement also from the bases of the need for a LAP.

Value of your property is not the only criteria for banks to decide whether you are eligible for a loan. It must be noted that as a standard practice, lending institutions generally sanction loans of approximately, 65% of the value of your property. The tenure offered in LAP is 15 years subject to age norms while the rate of interest varies between 12% to 16%.

They would often look into your income details, savings, employment track and other aspects before coming to disbursement. Your property or collateral would be evaluated on the current market value and correspondingly the loan amount would be calculated. Getting a LAP becomes much more streamlined and swift if you have all the basic documents in place. A quick check of the documents for LAP.

  • KYC i.e. age and address proof.
  • Income documents
  • Ownership documents of property.
  • Bank statements for the previous six months.
  • A cheque for the processing fee.
  • Others documents that may differ for each FI.

The Bottom Line: What is it that makes consumers go for Loan against Property when they have other options available? The answer to this is subtle yet effective. The rate of interest is lower than personal loans making it one of the cheapest and pocket-friendly loans coming second only to home loans. The loan tenure of 15 years makes the EMI more comfortable and there is also the option of liquidating your money in the case of any big expense. The only drawback with LAP is that the bank may take possession of your property if you fail to repay the loan amount, however, a careful and planned approach should you see through quite smoothly.

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