How to Apply for a Loan Against Property: A Step-by-Step Guide
04 October, 2023
A complete guide to Loan Against Property
If you need to get funds in bulk with the flexibility of end-use of the loan amount and lower interest rates, a Loan Against Property is the right product for you. It is a popular financial product which allows you to borrow funds with ease. Let us decode its meaning and other related aspects.
What is a Loan Against Property?
A Loan Against Property (Loan Against Property) is a loan that is granted against property as collateral. The property could be a residential or commercial property or industrial property.
The property remains with the lender till the repayment of the entire loan amount, along with interest.
Both salaried and self-employed individuals can apply for a Loan Against Property. This loan amount can be used for any purpose - medical expenses, personal use, wedding, buying another property, business expenses, etc. It is categorized as a secured loan. The amount of the loan is decided based on the market value of the property.
Benefits of Loan Against Property
Lower interest rates: Loan Against Property is a secured loan, which means that the lender has your property as collateral. As a result, the interest rates for Loan Against Property are usually lower than other unsecured loans like Personal Loans or Credit Cards.
Higher loan amount: Since Loan Against Property is a secured loan, the loan amount that you can get is generally higher than other unsecured loans. This is because the lender has the assurance of the collateral and can lend you a larger amount of money.
Longer repayment tenure: The repayment tenure for Loan Against Property is usually longer than other unsecured loans, which means that you have more time to repay the loan without worrying about defaulting.
Multiple uses: You can use the funds from Loan Against Property for various purposes, like funding your child’s education, expanding your business or renovating your home.
Easy to apply: The application process for Loan Against Property is simple, and the loan disbursal is usually quick.
Documents required to apply for Loan Against Property
- ID proof: PAN card and Aadhaar card
Address proof: Driving license, passport
Bank statements for the last six months
Income tax return for the last 2-3 years
Registered documents of the property
Any other documents required by the bank depending upon the case
Things to know while applying for Loan Against Property
Check your eligibility: Before applying for Loan Against Property, check your eligibility. The eligibility criteria may vary from lender to lender, but some common factors include age, income, credit score, property type and ownership.
Assess your repayment capacity: It is important to be realistic about your repayment capacity. You may take into consideration your monthly expenses for day-to-day living, existing EMIs, children’s fees, emergency funds, etc. As Loan Against Property is a secured loan, you must have a stable source of income to repay the loan amount.
Compare the lenders: You may compare the interest rates and processing fees across various lenders to get the best possible rates. It is also important that you do the research beforehand as applying to multiple lenders may impact your credit score.
HDFC Bank offers Loan Against Property at attractive interest rates. HDFC Bank Loan Against Property is available at 8.75-10.40% independently and a loan against commercial property is available at 9.00-10.40%. The processing charges are nominal and up to 15 years Loan Tenure is available.
Loan amount and tenure: Check the loan amount that you can avail as Loan Against Property depends on the value of your property. It’s also important to select the loan tenure wisely. A longer tenure may mean higher interest rates.
Read the terms and conditions: Before signing the loan agreement, read the terms and conditions carefully. Understand the loan repayment schedule, prepayment charges, and other clauses mentioned in the agreement.
Get an insurance cover: Taking insurance while availing of Loan Against Property is important to safeguard oneself and one's family from any unforeseen circumstances. A property is mortgaged while availing of Loan Against Property, and in case of any unfortunate event such as death, disability, or illness of the borrower, the family may face difficulties in repaying the loan. In such a scenario, having an insurance policy can provide financial protection to the family and ensure that the loan is repaid without any burden on them.
Ideal tenure for Loan Against Property
Loan tenure can have a huge impact on your loan obligation; hence it is important to choose the same wisely. You must keep in mind factors such as income, age, loan amount, interest rate, eventual EMI, other financial obligations, etc., before deciding upon tenure.
Applying for a Loan Against Property can be a good option for those who need a large sum of money, lower interest rates and flexibility of usage. However, it is important to follow certain rules before applying for the loan, such as checking eligibility criteria, repayment capacity, loan amount and tenure, etc. By following these rules, you can avail of a Loan Against Property with favourable terms and conditions that suit your repayment capacity.
It is important to remember that Loan Against Property is a secured loan and defaulting on payments can lead to the loss of the mortgaged property.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. XXX Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
