A loan against property is a secured and comparatively quicker solution to your financial needs. The LAP loan is one of the most preferred financial products by loan distributors and financial institutions because of the property as the collateral. Given its secured nature, a loan against property is easier to get if your property documents are correct, updated, and without any disputes.
A loan against property or mortgage loan is a multi-purpose financial product. You can use it for higher education, home renovation, house building, startup, and many more purposes.
There are certain things borrowers need to know to be eligible for the loan. These aspects determine the amount of EMIs, rate of interest, tenure, loan to value, etc.
We will explain the Loan against property and factors affecting the tenure of the loan in the passage. Read them and make an informed decision for the loan application.
What is a Loan against property?
LAP loan is a collateral-based secured loan. Banks and financial institutions keep your property documents for the tenure of the loan and provide you with a certain percentage of the property value in the form of a loan.
People pledge their fixed assets and non-agricultural land for the mortgage. The rate of interest generally stays lower than a personal loan.
Lending Ratio
The majority of the financial institutions provide loans up to 65 per cent of the collateral property’s valuation. Some of the lenders offer loans up to 80 to 90 per cent of the property’s market value, subject to high ticket assets such as three crores and above.
Factors Affecting Tenure of the Loan Against Property in India
Loan Amount
Your loan amount decides repayment years. Generally, the higher the loan amount, the tenure gets longer. Longer tenure is desirable for people with saturated monthly expenses and who cannot afford additional expenses.
If you can afford an extra amount with EMIs, shorten the loan tenure and increase the amount to save paying extra on loan interest. As per experts, an individual’s loan amount should not exceed forty per cent of their monthly income.
Equated Monthly Instalment
Though the increasing amount of EMI will help in closing the loan earlier, it could put an extra financial burden on you. The key to the matter is a balanced plan between expenses and the source of income.
Your decision on EMI should not only rely upon pay off the loan at the earliest. Make a list of liabilities and future plans. Compare them with the monthly source of income and accordingly adjust your EMI amount.
After consideration and planning, if you have the surplus fund for an extra amount of EMI, then only you should go for higher EMIs to pay back the loan against property earlier than the original end month of the loan tenure.
So, your decision about the amount of money and EMI affects your LAP tenure significantly.
Rate of Interest for Loan Against Property
This is a pretty straightforward condition. If your lender charges a higher rate of interest, your amount of EMIs will increase, and eventually, loan tenure will be longer. Long years to pay back because of the higher amount of the loan. The process is connected backwards and forward.
To make it further relevant, please read through the table given below about the current interest rates of the leading banks in India. The chart will help you to decide which bank to contact for your loan against property.
The Chart with updated interest rates and processing fees for LAP as of 30th September’21
| Bank | Interest Rate for LAP | Processing Fees |
| State Bank of India | 8.05 per cent
|
0.50 per cent (Range between 2 thousand to fifty thousand INR)
|
| ICICI Bank | 8.35 per cent | 0.50 per cent |
| HDFC Bank | 8.75 per cent | 0.75 per cent |
| Axis Bank | 8.50 per cent | 0.75 per cent |
| CITI Bank | 6.90 per cent | |
| PNB Housing Finance | 8.90 per cent | 0.75 per cent |
| LIC Housing Finance | 8.50 per cent | 0.75 per cent (maximum 25 thousand INR) |
| Kotak Bank | 9.50 per cent | 1 per cent |
(Source: myloancare.in)
Age and Income of the Applicant
If you are near your retirement or past your productive years, there are chances that banks and loan distributors will reject your application for a loan against your property. Lenders want young working people with an impressive and reliable source of income.
A regular and stable flow of income ensures their repayment of the loan. So, age matters a lot in deciding your loan tenure.
Example: A person in their 30s with a reliable source of income can pay 15 to years comfortably. The person can also reduce the loan tenure by increasing the amount of the EMI. On the contrary, a person in their 60s nearing retirement or already retired will most probably not be able to pay EMIs on time. Lenders will not sanction the person’s application.
Note: There is a special type of mortgage loan that keep properties from aged people and pay a sum of money in return mostly monthly. This arrangement is just the opposite of the EMI system for people with fixed assets but no source of income.
A loan against property is an efficient method to raise funds for personal and commercial requirements. It’s also vital that you choose the right tenure considering the above-mentioned factors affecting the LAP.
