Everything You Need to Know About Loan Against Property

It is impossible to predict when a financial emergency will occur. You wish you knew about them beforehand but it rarely happens. God forbid, if one day any such financial emergency occurs and you do not have enough funds to handle it, what is your best next option? Of course, asking your friends or family is one but not everyone is ready to help you, at a random time.

So, whenever you find yourself in this kind of situation, a house can be of great help. How? You can actually get a loan against your house. The term “loan against the property” refers to getting a loan on your property as a mortgage. This definitely doesn’t mean that you cannot live there anymore. You and your family can continue to live there while you repay the loan by paying in equated monthly installments. There is a limit of Rs.25 crore for LAPs, with mortgage loan interest rates starting from 7.5% per annum.

In order to fully understand how a loan against property works and the eligibility criteria, let’s take a look at some of its features.

What is Loan Against Property?

Banks provide Loan Against Property (LAPs) as secured loans secured by mortgages on assets. It can be your residential home, piece of land, or your office property. A loan against property is given in accordance with the price of the property. The property will stay as collateral till you repay the loan amount along with the due interest. Over years, LAP has become a preferred choice for people who need money urgently. Also because of its flexibility, it makes the best choice for many.

More about Loan Against Property

If you have decided to go for Loan Against Property, you should do full research and try to understand a lot of things. Some of them are explained below.

  • In case, due to any reason, you fail to repay your loan amount, the lender is entitled to do whatever they want to do with the property.
  • A loan against property is a secured loan as the lender gets the right over the property. This also means that the eligibility criteria are also very easy to meet. Plus, the interest rate is also lesser.
  • How do banks decide on the loan amount? The loan amount is calculated after getting your current property’s price. Only a fixed percentage of the maximum value can be taken as a loan.
  • When you decide to go for Loan Against Property, keep your property documents ready. You will have to submit those while applying for the loan.
  • If you choose Loan Against Property, you can use the loan amount for any of your personal use. There are no end-use restrictions.

Documents Required for Loan Against Property

For salaried employees, you will need the following documents:

Address proof

Income Tax returns

PAN Card

Identity proof

Bank account statements for the previous three months

Salary slips

Property documents

For self-employed people, they need:

Address proof

Identity proof

All relevant documents of the mortgaged property

Form 60 or PAN card

Bank account statements for the previous 6 months

Property documents

Financial statements

IT returns

Steps to apply for Loan Against Property

Follow the below steps if you want to get a loan against your property

Step 1:

Do your homework. Ask friends or family, make the internet your best friend, and do your proper research before choosing the bank.

Step 2:

Find your property’s market value which will help you calculate the loan amount.

Step 3:

See if you meet all the eligibility criteria for the loan against property. Also, collect all the documents that prove it’s your property.

Step 4:

Once you have all the documents ready, you can fill in the loan application, either by going online or visiting the nearby office of the financial institution.

Factors that can affect your loan eligibility criteria:

Your age

Younger you are, the more chances of you getting approved. This is because if an individual is nearing retirement age, then it may get difficult for him or her to pay back the loan.

CIBIL score

If your CIBIL score is less than 700, your loan might not get approved.


The provider of such a loan will assess the tenure you select. In order to determine whether a lender is confident in your ability to repay the loan, the lender will look at this factor.

Property documentation

The property papers are perhaps the most important part of the mortgage loan documents list. The LAP application may be rejected if any of these documents are not satisfactory.

Charges associated With Loan Against Property

When you go for Loan Against Property, you also need to know about the additional amount that the banks ask for, in addition to loan repayment.

Interest rate

Like any other loan, a fixed or floating rate of interest is charged by the borrower. This is paid through EMIs.

Processing fee

A one-time non-refundable fee has to be paid by the borrower.

Pre-payment or part-payment charges

People who have taken the loan on a floating rate of interest, are not required to pay any amount for pre or part payment. But if you have taken the loan on a fixed rate of interest, then you will have to pay charges for part payment.

Foreclosure charges

Like part payment charges, individuals who take advantage of floating interest rates will not have to pay foreclosure charges. In contrast, borrowers who have taken the loan on a fixed interest rate will have to pay a nominal foreclosure fee.

EMI bounce fees

If a borrower is unable to pay the EMI on time, then they will be charged a penalty by the bank

Repaying the loan

A Loan Against Property is generally given for a long time of up to 25 years. Just like a home loan, you have to repay this loan in monthly EMIs; you can also choose to prepay a big amount beforehand if you have enough money.