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All About Loan Against Property: You Asked, We Answered

We take ‘ask and you shall receive’ very seriously!

While you may have read, researched, and done what not to ensure you are taking the right decision but there may be some questions that must not have crossed your mind! Thus, this month, we scoured the net to select the most frequently asked questions that customers asked on Loan Against Property and answered them for you.

We truly hope we have been able to answer all your queries on Loan Against Property. And yes, you can thank us later!

  1. Is Loan Against Property a good idea?

    A Loan Against Property is one of the most sought-after loans to finance your ambitions. If you own residential or commercial property, you can consider it as collateral to acquire funds at competitive interest rates.

  2. How can I get a LAP without ITR and without income proof?

    In case you do not have income proof, we recommend the following ways to acquire a Loan Against Property:

    • Explain your income source to the representative

      In the case of a lack of income proof or ITR, it is advisable that you specify your income source and the lack of documents to the representative evaluating your property. The final decision will most likely depend on the information you provide to the representative who will determine your income and your repayment capacity, this is subject to lender discretion on acceptance of documents.

    • Keep a check on your savings

      Maintaining a high average monthly balance with considerable reserve may amp your chances of getting a loan, however other factors play a significant role.

    • Opt for a co-applicant

      One can also consider including an earning family member as a co-applicant if they have a good credit history. A salaried co-applicant increases the likelihood of your loan being accepted.

    • Select a lower LTV

      LTV, (loan to value) denotes the portion of the loan that the lender will fund. For instance, if the LTV is 90%, the lender will fund only up to 90%, and the borrower will be responsible for the remaining 10%. Negotiate with your preferred lender to provide you with a lower LTV. Remember that if you choose a lesser LTV, you will have to pay the difference out of your own pocket.

  3. What documents are required to get a loan for a property?

    Loan against property eligibility comes with a few conditions like age bracket, nationality, and such other factors as per Lenders internal policy. Let’s take a look at the list of documents you need to avail the loan hassle-free. Please note that document requirements may vary from lender to lender. Do check the website or connect with their customer care representative to get detailed information on documents.

    Loan Against Property Documents

    Salaried Individual

    Officially Valid Document Valid Document Residence ownership proof Proof of income Proof of job continuity
    • PAN card / Form - 16 (Mandatory)

    • Passport

    • Proof of Possession of Aadhaar

    • Voter’s ID

    • Driving License

    • NREGA Job Card

    • Letter issued by the National Population Register containing details of name and address.

    • Property documents

    • Maintenance bill

    • Electricity bill

    • Pay slip (Last 2 months)

    • Increment or Promotion letter

    • IT returns (for 3 years)

    • Form 16

    • Certified letter from Employer

    • Current job appointment letter

    • Current employment certificate

    • Experience certificate

    Self-Employed Individuals

    Officially Valid Document Residence ownership proof Office add. & ownership proof Proof of business existence Proof of Income
    • PAN card / Form -16 (Mandatory)

    • Passport

    • Proof of Possession of Aadhaar

    • Voter’s ID

    • Driving License

    • NREGA Job Card

    • Letter issued by the National Population Register containing details of name and address.

    • Property documents

    • Maintenance bill

    • Electricity bill

    • Property documents

    • Electricity bill

    • Maintenance bill

    • Sales deed/ agreement (executed)

    • Saral copy (3 years old)

    • Copy of tax registration

    • Company registration license

    • Last 3 years ITR of along with computation of income duly attested by a CA

    • Audited balance sheet and Profit & Loss accounts, including tax audit report, if applicable

  4. My CIBIL score is low (under 600). Am I eligible for a LAP?

    To be able to avail of a Loan Against Property, a borrower must meet specific requirements or eligibility criteria. Among these is a criterion of a high CIBIL score which usually reflects a borrower’s repayment capacity. For a borrower to apply for LAP, he/she must have a minimum score of at least 750.

    However, this requirement differs from lender to lender. Many lenders in the market may consider an application with a low CIBIL score but offer the loan at a high interest rate. It is advisable that you connect with your lender and negotiate well.

  5. What are the advantages and disadvantages of LAP?

    Given the nature of this loan, the advantages of Loan Against Property outweigh its disadvantages. Let us go through them in detail:

    Advantages:

    • Caters to all business and personal needs

    • Loans available on long tenures

    • Suitable rate of interest as compared to unsecured loans

    • Loans available on both, personal and commercial properties

    • Higher loan amounts available

    • Continued usage of the borrower’s property

    Disadvantages

    • Varied evaluation by lenders resulting in varied LTV

    • Fear of loss of property in case of inability to pay EMI as per document

    Please note that every lender has varied offerings suiting the requirements of the borrower. For instance, Loan Against Property product at Godrej Capital has the following advantages that places it as one of its kind in the market:

    1. Low interest rates starting from 9.25% per annum

    2. Long tenures of up to 25 years

    3. Loans of up to 90% of the market value of the property

    4. Interest-Only payments available for up to 36 months

    5. Flexible repayment options under Design Your EMI

    6. Instalments as per choice: quarterly and bi-monthly soon to be available

  6. Why do LAP interest rates change frequently? What is the minimum ROI for LAP?

    Loan against property interest rates will change frequently only if you have opted for floating interest rates. Loans with floating or fixed interest rates are the typical lending alternatives provided by financial institutions. In the case of a Fixed Rate Loan, the interest rate is set either for the whole term of the loan or just a portion of it.

  7. Is insurance mandatory for LAP?

    It is advised that customers avail a protection plan in their financial interest. Such plans are protection for your family against financial costs that follow life-changing events such as natural or accidental death.

    Even if your lender does not require one, getting one is still a good idea before mortgaging your property. Insurance shields you against unanticipated events that could harm your property and put a further financial strain on you.

  8. Does Loan Against Property have tax benefits?

    Yes. You can avail of tax benefits under Section 24 and 37 of the Income Tax Act. Under Section 24, you can avail of tax benefits on the interest amount if you use the newly acquired funds to finance your new home. Under Section 37, you can avail tax benefit on the interest amount paid toward Loan against Property.

  9. The property is in my mother's name. Can I get a Loan Against Property?

    Yes, a borrower can opt for a Loan Against Property even if the property is in the borrower’s mother’s name. However, please note that the borrower’s mother should be a co-applicant in the loan application.

  10. What are the possibilities to get LAP (vacant land) to start a new business?

    By definition, a Loan Against Property is a secured loan product where property, self-occupied, rented, or any piece of land owned by the borrower, can be considered a collateral for funds. In short, if you have vacant land, you can apply for a Loan Against Property to start a new business, however, the policy to lend against a Plot of land differs from lender to lender.

    Every lender has a certain eligibility criterion to apply for a loan such as type of property, ownership of the property, legal clearance of the property, profile of the borrower, etc. It is advised that you check with your respective lender beforehand and make an informed decision.

  11. What happens if someone has taken LAP and dies?

    In the case of the demise of the principal borrower, there are several scenarios that could play out. Let us discuss them:

    • In the case of a single applicant, the next of kin (existing members of the deceased person’s family) would be expected to pay the remaining amount

    • If a borrower has taken a joint loan and the primary applicant dies, then the entire responsibility of repaying the EMIs will lie with the other co-applicant.

    • Finally, if there is no surviving member or the other applicant is unable to repay, the lender may choose to seize the property

    To avoid such situations, it is advisable that the borrower opts for insurance cover where the insurer pays an agreed amount should one experience the risk that is insured. Before applying for the loan, ensure you discuss this with your preferred lender.

  12. What is the easiest way to transfer my LAP to a lower interest rate?

    In case a borrower is not satisfied with the incumbent lender, one can opt for Loan Against Property Balance Transfer. Let us explain this in detail.

    With Balance Transfer, you can transfer an existing Loan Against Property to a lender that offers a suitable interest rate. You can research and compare the various options online aggregators or through channel partners, and opt for a lender that fulfills the one, few, or all the following criteria

    • Lower interest rates

    • More flexibility for loan repayment

    • Larger Home Loan Top-Up amount

    • Better customer service

    Once you’ve narrowed down on the lender, ensure you meet their eligibility criteria, and the lender provides you information on charges beforehand to avoid nasty surprises. Lastly, a word of caution here would be borrowers contemplating Balance Transfer should opt in the early stages of their loan. As the loan matures the principal amount gets paid, it reduces your liability and makes a balance transfer a futile effort.

  13. Is it possible for an 18-year-old to take out a LAP?

    Yes, it is possible for an 18-year-old to apply for Loan Against Property. However, the age eligibility criteria differ from lender to lender, with the minimum age limit being 18 years. But before you apply, we advise that you check with your respective lender to make an informed decision.

  14. Is personal LAP available?

    Given the nature of this loan, Loan Against Property can be availed for personal and/or business requirements (other than for speculative purposes) by both, salaries or self-employed individuals.

Godrej Capital through its subsidiaries, Godrej Housing Finance and Godrej Finance, offers products such as Home Loans, Loans Against Property, Balance Transfers, and many more. To know more about our offering, click here

Disclaimer: The names used in this article are fictitious and are used for representational purposes only

The contents of this article is for information purpose only. For more details, please refer to the product or service document and/or connect with our customer representative prior to making any financial decision. The information is subject to update, completion, revision and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its affiliates to any requirements. Godrej Capital or its affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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