Loan Against Property

A loan against property is given to individuals who have some property. It can be taken keeping a residential or commercial property as collateral. It is basically a loan with a longer tenure and lesser rate of interest than a personal loan. A loan against property can be used for any purpose almost like a personal loan. It can be used for a purpose like marriage, expanding business, taking a foreign trip or sending children to overseas for education.

Eligibility Criteria

To apply for a loan against property, the property should be a self-owned property. The loan given by a bank is as a certain percentage, around 40-60%, of the market value of the property. The value of the property is decided by the bank offering you loan against property.
Your eligibility criteria for the loan against property depend on a host of factors. These normally include your income, the cost of the property to be mortgaged and your repayment track record. The eligibility criteria may vary depending on the bank.

Documents required
The following are the documents required while applying for loan against property:
Identity proof--A copy of passport, driving license, voters ID or PAN card
Proof of residence--A copy of passport, ration card, driving license, telephone bill or electricity bill.
Income proof-- Salaried people need to submit their latest salary slip, Form 16, salary certificate from the employer, and bank statement for the last 3 months. Self-employed people need to provide their IT returns for the last 2 years, balance sheet, and profit & loss account, and bank statements for the last 6 months as proof of income.
Photocopies of all the documents related to the property.
You also need to give a declaration stating that the loan amount would not be used for the purposes of carrying out any illegal activities or for speculative activities.
A valuation report of the property from the professional valuer appointed by the bank


Why should one take a loan against property instead of a personal loan?
A loan against property can be taken for any purpose like a personal loan. However, a loan against property has a lower rate of interest as well as longer tenure.

How much amount I can get in a loan against property?
The amount of loan against property given to you depends on various factors including your income, repayment capacity and your past credit history. It also depends on the value of the property used as collateral.

Can I take a loan against another property if I have a home loan from a bank?
Yes. Some banks offer loan against property even if you are repaying a home loan.

What is a fixed rate loan against property?
When a bank charges interest rates at a fixed rate then it is it is called a fixed rate loan against property. In this type of loan the interest on the loan about remain fixed and constant. You should opt for this only when you are sure that the interest rates have been at the bottom and can only go up.

What is a floating rate loan against property?
When the interest rate charged on a loan against property keeps changing with respect to the prevailing rates in the market over the tenure of the loan, then it is called a floating rate loan against property. This type of interest rates change periodically, and accordingly the tenure increases or decreases and also the EMI amount increases or decreases.

How the valuation of the property is determined?
The value of the property is determined by the bank offering you the loan against property.

What is an amortization schedule?
An amortization schedule is a table giving the information on reduction of your loan amount by monthly installments. The amortization schedule has information about the breakup of every EMI towards repayment interest and outstanding principal of loan.

How can the loan against property be foreclosed?
A loan against property can be foreclosed by contacting the loan lending bank. Banks normally charge a small amount for foreclosing a loan amount. To foreclose the loan you have to issue a cheque favoring the bank. After clearance of the cheque the bank will release documents for that loan.

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