Financial planning is a must for all individuals but there are moments when your best laid plans are upended. When the need for extra funding arises, a loan against property can solve your financial problems. A loan against property (LAP) is a secured loan that allows you to pledge your residential or commercial property as collateral for a loan. You unlock the value of your property and in return the bank offers you a loan to meet your objectives.

This blog is a beginner’s guide to understanding the basics of a loan against property. It will help you with essential information regarding the eligibility, documentation, and the myriad benefits of a loan against property.

 Understanding the Basics of Loan Against Property

A Loan Against Property is a loan granted by banks or non-banking financial companies (NBFCs) against the mortgage of your residential or commercial property. The property acts as collateral, giving the lender a sense of security and reducing the risk associated with the loan.

It is important to note the difference between a home loan and a loan against property. They differ in their usage and purpose. A home loan is used to finance the purchase or construction of a new home, whereas a loan against property permits borrowers to leverage the value of their existing property to meet a variety of personal or business needs.  

 Are You Eligible to Take a Loan Against Property?

The eligibility criteria for a loan against property vary from bank to bank or NBFCs. Eligibility is determined by factors such as age, income, a good credit score, property valuation by the banks, and the correct documentation. Loans are offered to salaried, self-employed individuals, partnership firms, Private Limited Companies, and Closely held Public Ltd Companies.

How Much Loan Amount Can You Get?

The loan amount you receive against your property depends on factors such as the market value of the property, the lender’s policy, and your repayment capacity. Generally, lenders offer loans up to 60-80% of the property’s market value.

What Documents Do You Require to Get a Loan Against Property?

The documents required for a loan may vary at various banks or financial companies. These could commonly include an application form and passport-size photograph, KYC documents, proof of income, bank statements and property-related documents such as title deeds, or occupancy certificates.

 Advantages of Loan Against Property

A loan against property benefits include low interest rates, long repayment tenures, high loan amounts and the freedom to utilize the loan amount as you deem fit.

  • Low-interest rates

LAPs generally offer lower interest rates compared to personal loans or credit cards. Since this is a secured loan, lenders have the option of making a legal claim on the property, thereby reducing their risk exposure should there be a loan default. A lower interest rate also lowers the EMIs for the borrower.

  • Flexible use of funds

You can use the loan amount for various purposes, such as debt consolidation, business expansion, education, or medical expenses.

  • Longer tenures

LAPs have longer repayment tenures as compared to other loans. The extended repayment period allows you to manage your finances effectively.

  • Quick disbursal

If you meet the eligibility criteria and have the required documents in place, LAPs can be processed quickly, ensuring timely access to funds.

 A Loan Against Property is an effective financial tool for meeting monetary needs by leveraging your mortgaged property. Unlock the value of your property with an IndusInd Bank loan against property. With low interest rates, quick disbursements and a host of other features, this loan is a good way to fulfil your financial requirements.