One
of the recent popular modes to acquire additional funds is to secure
a Loan Against Property. It is preferred mode over the other
competitive loans like a Personal Loan or a Home Loan. The main
deciding factor to select any particular kind of loan is the interest
rate or the formalities involved in acquiring one.
What
is Loan Against Property (LAP)?
The
term ‘loan against property’ is in which the borrower takes a
loan from a bank or financial institution against the security of a
property owned by the borrower. The nature of the property will
determine the amount of the loan that is possible.
Being
a secured loan, the interest charged on it are lower than any other
alternatives of loan. The average range of interest rate is from
12%-16% pa for a tenure of 15 years.The only deciding criteria is the
condition of the property that helps the lender decide the market
value of the property. The loan is given on certain percentage basis
(around 40-60% of the value) of the market value of the property.
What
kind of properties are used for LAP?
- Self occupied residential Property or any other self owned property
- Commercial Property owned by borrower
The
only criteria being that the property should be free from any
mortgage or any other lending.
What
is the main purpose for LAP?
Although,
LAP has the following applications, as a Financial Planner, we advise
to go for these options only if you have secured well for your
primary financial goals and have a huge property asset lying
unutilised at your end.
- Business expansion
- Son/Daughter marriage
- Son/Daughter Higher education abroad
- Dream vacation
Who
is eligible to get a LAP?
Any
individual including the salaried,professionals or even self employed
individuals are eligible to take a loan. The main criteria in
addition to financial stability is the age factor of availing the
loan.( generally the minimum age to acquire a LAP is 24 years).
Compare
the LAP services
A
visible comparison of the existing LAP services made available by
financial institutions. Please note that the detailed information can be made available on their respective websites.
| SBI | HDFC Bank | Bajaj Finance | |
| Interest rates | 2.50% Above base rate. Currently at 12.50% pa | 11.35% to 13.35% pa | Not available |
| Margin for Loan | 60% of Market Value | 60% of Market Value | Not available |
| Tenure | 5 -10 years – term loan in equated monthly income | Upto 15 years.EMI /Overdraft facility available | 15 years |
| Eligibility | 24 times of net monthly salary or 2 times net annual income | Varies from case to case | Varies from case to case |
| More details | Special product called rent plus for commercial /residential rental earnings | Overdraft facility , rent receivables | Lease Rental discounting |
| Website | https://www.sbi.co.in/portal/web/personal-banking/loans-against-property | http://www.hdfcbank.com/personal/products/loans/loan-against-property | https://www.bajajfinserv.in/finance/loan-against-property |
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