Loan Against Property or LAP


A loan against property (LAP) is precisely what its name implies - a loan that is paid out against a property mortgage. The loan is offered in relation to a specific percentage of the market value of the property, which is approximately around 40-60%. 
In India, LAP is categorized under the 'Secured Loan' group where the borrower shows his property as security, which can be a self-occupied ownership property or a rented out property (both residential and commercial). It's not necessary for the property to be a constructional structure. It can be a piece of land as well.

LAP usually comes with an interest rate of 12-15.75%.

In India, maximum tenure offered for a LAP is 15 years.

Starting the process

If you want to take a loan against property, the first thing you need to do is to shop around for a lender. Use the internet to learn about the eligibility criteria of a LAP and this is likely to vary from one bank to the other. In general, most banks would ask for the following -

Your income/savings details and also information of the debt obligations that you have

Cost of the property that you intend to mortgage

Your credit record

Repayment track record of loans taken prior to this

Steps involved-

Application: The loan application sets the ball rolling in a LAP. Select your lender and fill up the loan application form with necessary details.

Processing: After you apply, the bank starts processing your application, whereby the loan procedure starts moving. Your lender can also call you over for a discussion. Carry original documents with you when you go for it. Following this, the bank will conduct a field investigation of the matter and verify the documents presented by you. 

Documents required are usually income proof, age proof, address proof, identification proof, property papers, and employment details. When you submit your credit documents to the bank, you might have to shell out a processing fee as well, which is 1-2% of the desired loan value. The bank can also ask for an upfront fee for miscellaneous expenses.

Loan sanction: Once the bank has verified your financial credentials, it will work out a loan eligibility amount for you, which is put up in an offer letter along with terms and conditions and mailed across to you. You can accept the loan if it fits your bill by putting your signature on the acceptance copy.

Legal check and valuation: The bank will now conduct a legal check on the property that you intend to mortgage and evaluate it. Keep the property papers and No Objection Certificates (NOCs) ready for scrutiny.

Loan disbursal: If everything is in place and the bank is convinced of your loan repayment capacity, it disburses the loan through a Demand Draft (DD) or a cheque.

When you plan to take a LAP, consider your pay-off capacities very well, as, if you are unable to pay it back in full, you stand at the risk of losing your mortgaged property to the bank.


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