In India, there has been a Boom in Entrepreneurship over the Last Decade. People are willing to leave their comfortable, Safe Jobs and are opting for Risky but More rewarding Businesses. But the Major block faced by entrepreneurs is towards Financing their businesses, or when they need money for expansion. One of the Easiest ways out is a Loan against Property (LAP) from Financial Institutions ( Banks, NBFCs, and Home Finance Companies). Loan against property is also available for business growth to meet cash requirements for office expansion, capital expenditure for technology including software, hardware, and telecom systems, purchasing raw materials to meet seasonal demand, and meeting the increased demand of online sales.
Loan against Property refers to the secured loan category where the borrower gives a guarantee by using his property as a security. The right of ownership of the property is still with the borrower. Financial Institutions will exercise due diligence as far as the property is concerned, appraise its value, and offer you up to 90% of its value as a loan. Since this is a secured loan (you are offering a collateral),
What kind of property can be mortgaged?
You can get a loan against any type of property, from a house to a plot of land or a Leasehold Property (If long-term). It also doesn’t matter whether you live in that house or have given it on rent. The most important criteria is that the title of the property should be clear and there shouldn’t be any encumbrances
What are the eligibility criteria to get a loan against property?
The criteria will vary from one bank to another. However, from all the host of factors, the common factors that all banks, NBFCs, and Home Finance companies look at are:
- Your income, savings, debt obligations
- Business cash flow
- Cost/value of the property to be mortgaged
- Your repayment track record for other loans, credit cards, etc
- Financial Institutions will also check your credit history through information available from various credit bureaus.
- Justification for loan requirement
Based on your credit score and the above documents/analysis, the bank will ascertain your repayment capacity. In case you have ever defaulted on any bill payment, it will reduce your chances of getting a loan. After the bank is satisfied with the paperwork, it will offer you the loan, which will typically range from 70-90% of the value of the property.
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What will be required to get a loan against property?
- You require security, collateral, or guarantors for obtaining a Loan Against Property
- If the property you are taking a loan against has more than one owner, all of them will have to be joint applicants to avail of the loan
- The bank will check all the documents related to the title of the property, relevant proofs, and approvals
- proof of residence, such as a ration card, electricity bill, or telephone bill. You will also have to submit a copy of the proof of identity, such as a voter ID card, passport, or PAN card.
- A Self-employed person will have to provide a certified financial statement for the past two years.
Positive Features of LAP
- The lower limit starts from 2 lakh and there is no upper cap
- Can opt for both Floating and Fixed Interest Rate
- Longer Tenure of Repayment up to 15 years
- Cheaper Interest Rates (varies from 10%-16%)
- Simple Processing
- Loan up to 70% to 90% of Property Value
- A businessman can claim a tax deduction on the entire interest amount paid on the loan if he can prove that the loan was genuinely used to improve his business
How You Can Pay Back:
You can pay your loan in EMIs through post-dated cheques or through ECS to debit your Bank account through ECS with the EMI amount.
You can also prepay the entire loan outstanding anytime after 180 days of availing the loan or as per the terms of the loan signed with the respective Financial Institution. Pre-payment charges will be levied accordingly. If you intend to do so, please ask for the pre-payment amount to be waived or a reduction in the penalty charges.
volody.com has a perfect loan solution for you to satisfy your business requirements. We work with all the Banks, NBFCs, and Housing Finance Companies to offer you the best best-suited loan solution at very competitive terms with the best possible loan amount.
Please do drop in an email at connect@volody.com and we will ensure the fastest turnaround to get the loan amount credited to your bank account. Please visit https://www.volody.com/ to avail the services.
