How to Take a Loan Against Property And How Much Loan Can I Get Against It?

Ramaswamy Aiyyar is a well-known businessman in Chennai. He owns several commercial properties in and around the city. Known for his diversified business, Aiyyar is now looking to expand his business to other Indian states. While considering various options for raising funds, his friend’s suggestion to avail of a loan against property (LAP) struck a chord with Aiyyar. However, he is neither sure about the process nor has an idea about how much loan amount can he borrow by mortgaging his property. If you too are in the same boat as Aiyyar, then this article is for you. Here is all you need to know about availing of a LAP and the maximum amount you can get against it.

A step-by-step guide to availing of a LAP 
 
1. Fill out the application form 
 
To initiate the application process, first, fill in the LAP application form. Fill in the basic details such as your name, age and income, and the details of the property you are willing to put up as collateral. 
 
2. Confirm your details
 
Once you have filled in the required details, the financial institution will get in touch with you to verify your personal and property details. They will also check your creditworthiness. The lender will offer you a loan based on your submitted information and verification.
 
3. Submit the relevant documents
 
Every lending institution has its own loan against property eligibility criteria and document requirements. The loan against property documents required is usually mentioned on their website. Some of the common documents you require for LAP are the KYC document, income proof, property papers and insurance papers of the property, among others. For collecting documents, many financial institutions provide door-to-door services.

               Also Read: How to Use a Loan against Property EMI Calculator?
 
4. Wait for document verification
 
Once you have submitted the loan against property documents required, the lender will validate them. They will assess your debt to income ratio and your past debt records, among other things. If required, they may send their representatives to your residence or workplace to verify the authenticity of the applicant.              
 
5. Get the sanction letter 
 
After validating the documents furnished by you, the lender will make you an offer for a loan against property. Getting a sanction letter from the lender means they have confirmed the authenticity of your documents. After receiving a sanction letter from the financial institution, you must go through the fine print of the LAP terms and conditions. You must also check the loan against property interest rate at this stage. 
 
6. Await legal review and property valuation
 
After you have accepted the offer, it is time to get the property legally verified and valued. Check to see if there are any legal issues with your property. Through legal and on-ground procedures, the financial institution will analyse your property and its paper systematically.
 
               Also Read: Understanding Loan against Property Interest Rates and Charges

7. Get the funds disbursed 
 
Have you completed all of the above-mentioned formalities with your lender? If yes, then it is time to sit back and wait for the funds to arrive in your account.
 
So, that simplifies the loan against property private finance application process. However, the question remains, how much money can an individual acquire on loan against property?
 
The loan against property interest rate and fund amount depends upon several factors. Based on them, you can get a loan up to a maximum loan-to-value ratio of 75% of the property’s worth. Some of the most important factors that impact the LAP amount are:
 

• Property's valuation:

Property's valuation is critical in determining LAP eligibility, interest rate, and amount. Higher the property's value, the larger the loan amount. LAP approval is also influenced by the city and the property's location.
 

• Property's paper:

 
If you want to apply for a LAP, make sure you have all the necessary documents handy. In case you are unsure about the paperwork, it is advisable to check the loan against property documents required on the website of your desired lending institution. Always keep in mind that a lender likes a property that has a clear ownership title, is free of legal disputes and liens, and is insured.
 
               Also Read: Quick Guide to Mortgage Loans
 

• Applicant profile:

 
No financial institution wants to initiate legal action and auction the property in the event of default payment. Having a property by your side does not always imply that you are qualified for LAP. The lender considers your age, income, and debt-to-income ratio, among other factors, before approving your application. Having a non-stable income, regardless of the value of your property, will result in your loan application being rejected. To know more about your eligibility, you may also use a loan against property eligibility calculator.
 
To Conclude 
 
Nowadays, getting a loan against property online is a simple task. All you have to do is go to the lender's website, read the instructions, and submit an application for the loan. If you meet the criteria and have all the documents ready, then after a few rounds of verification you will get the funds in your bank account. Simple and smooth, isn’t it?