A loan against property is a secured loan that is sanctioned keeping an asset as a mortgage with the lender. This asset can either be an owned land, a house, or any other commercial premises. The asset remains as collateral with the lender until the entire loan against property amount is repaid.
This type of loan can help you deal with your emergency fund requirements or to repay some on-going loan amount. Since it is a secured loan, it is offered only when you keep freehold residential property with the bank as security. The interest rate on such loans is allocated according to the customer’s age, salary, loan amount, financial stability, repayment capability, etc.
Interest Rates Comparison for Loan Against Property
|Loan Against Property Provider||Loan Against Property Interest rate||Processing Fee|
|Citi Bank||8.80% onwards||Up to 0.5 % of the loan amount +GST|
|Syndicate Bank||11.50% onwards||0.5 % of the loan amount – Minimum ₹ 500/-+GST|
|HDFC Ltd.||9.50% onwards||Up to 1.50% of the loan amount or Rs. 4,500, whichever is higher|
|State Bank of India||9.60% onwards||1% of the loan amount (Max. of Rs. 50,000)|
|Kotak Mahindra Bank||9.60% onwards||Up to 3% of the loan amount|
|ICICI Bank||9.80% onwards||1% of the loan amount|
|IDBI Bank||10.10% onwards||Up to 0.50% of the loan amount|
|Bajaj Finserv||10.10% onwards||Up to 1.5% of loan amount|
|PNB Housing Finance Ltd.||10.25% onwards||Up to 2% of the loan amount|
|Tata Capital||10.50% onwards||Up to 2% of the loan amount|
|LIC Housing Finance Ltd.||11.30% onwards||1% of the loan amount|
|Axis Bank||11.35% onwards||Rs. 10,000 or 1% of the loan amount, whichever is high|
Important Points on Loan Against Property
If you are new to the process of availing a loan against property, then here are a few points to keep in mind:
Customers can make use of the loan against property eligibility calculators before applying for the loan. The eligibility calculator will take into consideration details such as one’s income, the value of the property and several other factors. Using the eligibility calculator, the customer can assess the loan amount he/she will be eligible to avail.
For planning one’s finances before applying for the loan, one should calculate the EMI amount and know how much he/she would have to set aside from their monthly net income to pay for the monthly instalments.
You must ensure that all the property certificates are in place and are in your name to avail the loan. Some of the property certificates that the lender would request to submit are the sales deed, lease deed, registration certificate, House Tax Return certificate, an approved building plan that has been attested by the Municipal Corporation, etc.
Choice of Lenders
Make a comparative analysis between lenders offering a favourable loan amount relative to the interest rate. While analysing, check for the fees being levied by each lender, along with the loan tenure being offered.
Process for Availing Loan Against Property
Here is the commonly followed process to avail a loan against property:
Opt for a reputed lender who offers the best loan against property deal in the market, one that suits your finances.
If the lender has a website, fill in the online application form. Enter your details, income and any other required information.
Fill in the details of the loan you’d wish to avail – loan amount, tenure, etc.
Based on the information that you have mentioned, the lender will calculate your eligibility.
The lender will then arrange collection of the required documents and begin the verification process of your documents as well as that of the property and carry out the property valuation process.
Once the lender is satisfied at the end of the verification process, then the loan sanction letter will be sent to your postal address.
Before final loan disbursement, you will have to submit the original documents of the property.
Types of Loan Against Property
Regular Loan against property
This is a preferred loan among borrowers and is availed to fulfil any kind of business and personal needs which may include loans for business expansion, acquiring assets, for marriage or any medical emergency. Lowest interest charged on Loan against property is 8.70%. Most banks and NBFCs provide property loans for purposes such as loan against a residential property, while only selected banks offer loans against commercial property. Financing companies are typically more open to extend loans against residential property. Very few NBFCs and banks offer loans against industrial property.
Loan against property Overdraft
This facility is availed by the borrowers who expect to have surplus income or fluctuating income during the year. This facility allows you to deposit the available surplus amount for any period which can be as short as a few days in your Loan against property account and reduce your interest liability. This option is highly suitable for self-employed businessmen or professionals who have fluctuating funds requirements throughout the year.
Loan against property Top Up
Top up loan means an additional loan amount that you can avail on your existing Loan against property. Top-up can be taken either from the existing bank or can be availed at the time of transferring your outstanding property loan amount from one bank to other banks to avail low-interest rates. The LTV cap on Loan against property is applied to calculate your eligibility on a loan amount. This means that the amount of top-up loan plus your existing mortgage loan outstanding should be less than or equal to 70% of the market value of the property. Top up amount eligibility may vary from bank to bank based on your income and value of the property and needs a thorough comparison.
Documents Required for Loan Against Property
Here are the commonly sought documents that the borrower will have to submit:
Identity proof – Passport, Aadhaar card, PAN, etc.
Address proof – Aadhaar Card, Driving License, Voter ID card, etc.
IT returns certificate
Income proof documents
Property documents – Sales deed, Registration certificate, Property tax receipt, a building plan that has been approved by the Municipal Corporation, etc.
Loan against property is a secured loan and does not come with any end-use restrictions. You need to keep your property such as a house or a commercial premise as collateral to avail such loans. These loans have a high loan-to-value and long repayment tenors. You can utilise the loan amount for various purposes like business expansion, education, debt consolidation, medical expenses, etc. After full repayment of the loan, you can regain the property documents that you have pledged as collateral.