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Full RM + FRM support Instant alerts & premium filters Rent negotiation & relocation helpComplete Guide to Loan Against Property for 2025
Published : August 31, 2023, 4:48 PM
Updated : December 21, 2023, 12:39 PM
Author :
Simon
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You can need finances across your life for several reasons - be it planning your wedding, investing in a business idea you believe in, or even a close one’s medical needs. This is where your land and property act as a huge asset, and collateral against which you can get loans. Since a loan against property is a type of secured loan, the interest rate is not only lower, but you also have more chances of approval. LAP schemes are also known as mortgage loans, wherein several factors such as the loan tenure, credit score, type of property, and your profile as an applicant will determine the LAP interest rate. But what exactly are the loan against property interest rates? How do you check your loan against property eligibility? What is the loan against property documents required to secure the same? We cover all of this and more, in this blog.
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Features and Advantages of Loan Against Property
When you apply for LAP, you can get it at typical interest rates between 8% per annum to 25% per annum. You can get up to 20 years maximum tenure for a loan against the property of up to INR 25 crores. The processing fee typically ranges somewhere between 1%-3% of the loan amount, excluding the GST for the same. Now let us look at the several beneficial features of Loan Against Property.
- Hassle-free documentation and approval: Real estate in the form of land or building has asset value and therefore getting secure loans, in this case, is faster than unsecured loans. The documentation of the ownership of the property acts as collateral in this case, and therefore allows for easy and fast approval.
- Low interest on LAP: Secured loans such as LAP typically come with a low rate of interest compared to unsecured loans. The chances of your getting a loan are especially if you have a good credit record and score.
- Retained ownership of the asset: If you are wondering if you will be handing over the ownership of the property, be at peace that you won’t have to. Offering property as collateral doesn’t mean the ownership changes hands. In fact, you are allowed to make a sale of the property if repayment of the loan is not possible.
- Flexible loan repayment options: Based on the bank or financial institution you want to borrow the loan from, you can choose from a variety of flexible repayment tenure, for a maximum of up to 20 years.
- Ability to pre-close: You can choose to go for a pre-closure of your LAP if you want to. If a home loan against property for instance comes has the option of variable interest rate, you can pre-close the loan without having to pay any penalties for the loan. You may however, need to pay a small amount if the loan against property comes with a fixed rate.
Checking the Eligibility of Your Loan Against Property
Taking a loan is always a big step. You need to ensure you have done the necessary research to ensure your eligibility and the appropriate income level to repay the loan amount. For instance, you cannot take a mortgage loan against property without income proof. Listed below are some of the more detailed criteria:
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Salaried:
A salaried individual availing of the loan must be:
- Anywhere between age 18 to 60 years
- A resident of India
- Possess a Bachelor’s degree
- Employed in a partnership firm, public, private, government or multinational company
- Fetching a monthly income of INR 40,000 or more
Self-employed / Non-professionals:
Any self-employed individual or non-professional person must be:
- A minimum of age 21 years at the time applying for the loan
- No more than age 65 years before the time of loan maturing
- Owner of a business organization that is operational for at least 3 years
- Owner of a business organization that has declared profits for the past 2 consecutive years
Documents Required for Loan Against Property:
It is best to be prepared with the needed paperwork to avail of the loan against the property. Listed below are the Loan against land documents required:
- The form of application
- KYC documents of the individual including Identity Proof, Ownership proof, PAN Card, Address Proof etc
Salaried:
- Salary slips of the last 3 months
- Form 16
- Proof of employment in the event the employer mentioned in Form 16 isn’t the same
- Bank statements of the last 6 months to demonstrate any existing salary and EMI repayments
Self-employed / Non-professionals
- The proof of business continuity with any of the documents including Tax Registrations under VAT, GST Registrations, Shop & Establishment Certificate, Service Tax etc.
- Audited financials of the past 3 years
- Proof of constitution with any of the documents including a Partnership Deed, Form 32, GST Registration Certificate, AOA, MOA etc.
- Most recent Service Tax, GST or VAT returns for the present financial year
- List of shareholder patterns and directors as of date
- Business Account Statements for the past year
- Any sanction letters for existing loans with statements that demonstrate EMIs for the past year
Determining The Duration of Your Loan Against Property
While the interest rate and the EMIs of the loan against property are definitely important to consider, you must also get a clear idea of the repayment tenure, because it affects the cost of borrowing. If you check a loan against property calculator, for instance, you will see that the higher the amount of the loan, the longer will the tenure to repay the loan belong, to not hurt your financial stability or stress the monthly budget. For example, if you are taking a loan against property, private finance against property can offer flexible tenure options anywhere between 2 to 20 years.
Your age also plays a key deciding role. For instance, if you want to take a personal loan against property for wedding purposes in your early 20s, you can opt for a long duration of repayment. Similarly, if you are nearing your age of retirement, you should opt for a shorter repayment tenure, given your income levels may drop or stop after retirement. In the case of individuals reaching retirement age, it is advised to choose from a range of loan against property for pensioners in the market. Similarly, if you are young but bad credit history, it may be difficult to get a low interest for a loan against a property with a bad CIBIL score.
Finally, the value of the property i.e. the collateral must be appraised by the lender before deciding the loan amount and eligibility. This property value will depend on the existing value of the market, and not any past or potential value. This is why you must always go carefully through the loan-to-value or LTV ratio given to you by the lender.
Steps To Apply for Loan Against Property
As you must imagine, there is a lot to consider before settling on the right source of loan against property. To simplify it for you, we have listed the critical steps you must conduct, to ensure a hassle-free borrowing experience.
Your checklist
- Do a careful and deep research of the lenders offering loans against property in their service or product portfolios.
- Compare the various interest rates, processing fees, EMI bounce charges, statement charges, foreclosure charges, etc.
- Know the maximum loan amount that you can avail, depending on your property’s value, as it can vary from lender to lender, and on whether you are salaried or self-employed.
- Check your eligibility criteria in details i.e. the provisions for you depending on your age, job status, residency in the country, etc. This means going beyond checking a loan against property eligibility calculator.
- Fill out the application form, so that the lenders can assess the risk associated with lending you the loan, typically done by gauging your asset, liabilities, income level, credit history, etc.
Best Banks for Loan Against Property
If you have opted to finally go for LAP, but aren’t sure about which bank to choose, worry not, we’ve got you covered with the list of loan against property rates of interest and loan amount offered. For more details on which bank to go for, you can head to the NoBroker forum here on this question.
| Bank name | Interest rate | Loan Amount offered |
| SBI | 8.45% to 10% p.a | Of up to Rs. 7.5 crores |
| HDFC Bank | 9.25% to 10.35% p.a | Of up to 65% of the value of the property |
| ICICI Bank | 8.90% to 9.10% p.a | Of up to Rs. 5 crores |
| Kotak Mahindra Bank | 9.50% to 11.70% p.a | Of up to Rs. 5 crores |
| Axis Bank | Up to 11.25% p.a | Of up to Rs. 5 crores |
| PNB | 9.50% to 11% p.a | Of up to 60% of the value of the property |
Note that just like variable interest rates across banks, there are financial institutions that may not accept loan against land property and may only accept loan against residential property or commercial property. Interest rates may also vary depending on the fact if you want a loan against agricultural land.
To check how much tenure and loan amount suits you, several banks and financial institutions have an instant loan against property EMI calculator on the website. While you can also use several loan against property interest rate calculators in the market, it is best to always go through the terms and conditions of the loan and associated documents thoroughly. It is also best advised to do a thorough loan against property interest rates comparison across banks before deciding on one to avail the loan from.
Trust the Finance Experts at NoBroker
So many of us want to create our dream home yet legal or financial complications get in the way. If you need a home loan against agricultural land, residential property, commercial ones or even loan against industrial property, just leave it to us. Here at NoBroker, we can help you get a loan at the lowest rate in the market! What’s more, we give you a dedicated Loan Manager to assist you through the entire process and ensure your loan gets dispersed within 72 hours!
FAQ’s
Ans. A loan Against Property or LAP is a type of secured loan that you can avail by pledging your property as collateral.
Ans. You will need several types of documents including proof of age, address, income level, property ownership, bank statements, property value etc. If you are a salaried individual, for example, you will need to provide the salary slip of the last 3 months, Form 16, Proof of employment etc. If you are self-employed, you will need to provide documents including proof of business continuity, Tax Registrations under VAT, GST Registrations, Shop & Establishment Certificate, Service Tax etc.
Ans. Yes, you will find many banks offering loans against property to NRIs, however, the rate of interest and related terms and conditions may vary.
Ans. Yes, you can take a loan against property for several purposes you need to declare, ranging anything from business purposes, personal emergencies, education, debt consolidation etc.
Ans. Yes, you retain the ownership of the property at the time of offering it as collateral. You are also allowed to sell the property in the case of inability to repay.
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