1. What is Loan Against Property?
Ans. Loan against property is a secured loan option wherein borrowers avail financing by mortgaging their commercial or residential property. Borrowers can use the loan proceeds for any purpose other than any speculative activities.
2. Which bank is best for availing loan against property?
Ans. For most consumers, the best bank/HFC for availing loan against property would be the one that offers the lowest interest rate as it would help them in saving on their overall interest cost. However, other features like loan tenure, LTV ratio, processing fees, pre-payment charges (in case of fixed rate LAPs) and loan disbursal time should also be factored while comparing various LAP options.
3. How does loan against property work?
Ans. A LAP borrower secures loan from a bank/NBFC/HFC by mortgaging his/her property and repays it over the loan tenure. Just like any other secured loans, the lender would foreclose on the mortgaged property in case of loan default.
3. What is the maximum loan tenure available under LAP?
Ans. Mostly, the tenure of a loan against property goes up to 20 years. However, this may vary from one lender to another.
4. What is the eligibility criteria for availing Loan against Property?
Ans. Your eligibility for availing loan against property would primarily depend on your age, property location and features, repayment capacity, credit score, occupation profile, etc.
5. What is the advantage of availing loan against property?
Ans. A few benefits of availing loan against property are:
- Interest rates lower than the rates offered on unsecured loan options
- Loan proceeds can be used for covering costs related to wedding, business, etc.
- Longer loan tenure of up to 20 years, leading to more affordable EMIs
- Bigger loan amount as banks and HFCs usually finance up to 70% of the property value
- Higher chances of loan approval due to its secured nature
- Overdraft facility is available, thereby, leading to lower interest cost
- Consolidate multiple high-interest debts at lower interest rates
6. Is it mandatory to have a co-applicant for availing LAP?
Ans. A co-applicant for a loan against property is mandatory only when the property being mortgaged is owned by more than one person. In such a case, all co-owners of the property need to apply as co-applicants.
7. What types of properties are accepted by lenders providing Loan Against Property (LAP)?
Ans. Different lenders have different criteria for the type of property to be accepted against a mortgage loan. However, mostly all lenders accept the residential, commercial or industrial property. It is important to note that the physical condition and age of the property may affect its acceptance by the lenders.
8. What is the maximum repayment tenure for a Loan against Property?
Ans. Banks/ HFCs usually offer loan against property for tenures of up to 15 years with many lenders offering maximum loan tenures of 20 years or more. For example, Bajaj Housing Finance and Godrej Capital offer loan tenures of up to 30 years and 25 years, respectively.
9. Can NRIs avail loans against the property?
Ans. Yes, there are several financial institutions that offer loan against property to NRIs.
10. What is the difference between Home Loan and Loan against Property (LAP)?
Ans. LAP allows individuals to raise funds by mortgaging their residential/commercial/industrial property, whereas home loan helps individuals buy/build a new house or extend/renovate an existing one.
11. What happens when Loan against Property is not paid?
Ans. Not paying your LAP EMI will incur late fees, penal interest and reduction in your credit score. Loan, if not paid partially/fully within 90 days, will be classified as Non-Performing Asset (NPA), which may lead your lender to initiate recovery actions under the framework of the SARFAESI Act, 2002.