Best Loans Against Property In 2023
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Loan against property (LAP) is a loan taken by an applicant for any purpose with the property owned by them as collateral. These loans fall under the secured loan category, and both salaried and self-employed individuals can avail them.
Financial institutions are not entirely interested in the end use of the loan and there are no set guidelines or mandates related to the use of proceeds of an LAP. In majority cases, these loans cater to big-ticket expenses such as weddings, setting up a business or its expansion, buying real estate, among others.
A loan against property is similar to a personal loan with the difference being the tenure which is longer than that of a personal loan, and can go up to 30 years. It’s to be noted that the property that has been mortgaged to a financial institution can still be used by the borrower.
Forbes Advisor India studied the loans against property offered by various banks and brought together a list of the best options available.
- HDFC Bank LAP
- SBI LAP
- Kotak LAP
- PNB LAP
- Union Bank Mortgage Loan
- Summary: Best Loans Against Property In 2023
- Difference between Home Loan and Loan Against Property
- Documents Required to Apply for Loan Against Property
- Important Factors that Help You Get a Loan Against Property
- Determining the Value of the Property for Loan Against Property
- Factors to Consider Before Choosing the Best Loan Against Property
Summary: Best Loans Against Property In 2023
Difference between Home Loan and Loan Against Property
Following is the difference between home loan and property loan:
Documents Required to Apply for Loan Against Property
You will have to produce your PAN card mandatorily, or if that person does not have a PAN card then will have to show the Aadhar card. It is not mandatory to produce both PAN or Aadhar.
- PAN card photocopy
- Form 60
Documents of the Property
- Sale deed or registry
- In case of a free hold land, one will have to produce a land registry
One of the following as the proof of income
- Latest payslip
- Form 16
- IT return copy as proof of income
One of the following the proof of residence
- Passport
- Ration card
- Electricity bill
- Landline telephone bill
One of the following for Identity proof
- Passport
- Driving license
- PAN card
- Aadhaar card
Important Factors that Help You Get a Loan Against Property
Following are the factors helping you get a loan against property:
Source of income:
Some people have this wrong notion in their mind that any one who has property can get a loan against property, which is not true as the banks are not interested in property but the cash. One needs to have a proper source of income to get a loan against property.
Title of the property:
Property against which the loan has to be taken has to be in the name of the person who has applied for the loan, and the person should have proper papers of the property.
Credit history:
Like any other loan in loan against property as well, the credit history of the applicant is of primary importance, people with a credit score 700 are more likely to get a loan.
Property:
Property to be mortgaged is of great importance and if the property is at a prime location then it is more likely that any financial institution would agree to give a loan on its behalf.
Disputes:
Title on papers of the property should be clear and there should be no dispute on it.
Government plans:
Property falling under any kind of government projects like master plan and to be acquired in some development projects are not accepted by banks for mortgage.
Determining the Value of the Property for Loan Against Property
Following are the factors to determine how much loan can one avail against a property:
Location:
Location of the property is very important, properties at prime locations attract financial institutions better than properties which can not be developed.
Circle rate:
It is another important factor that determines the value of the property, the more the circle rate, the more the amount of loan.
Kind of property:
The value of a property is going to be less for a free hold land, like in Delhi, and more for land with proper documentation.
Factors to Consider Before Choosing the Best Loan Against Property
Following are the factors that need to be checked to determine if we are getting the best deal in loan against property:
Interest rate:
Before selecting a personal loan, one will have to compare the interest rates various banks offer and accordingly go with the best personal loan. One can check the interest rates here.
Processing fee:
Interest rate is not the only thing making your loan expensive, there is something which is known as the processing fee, and this is something that people ignore; it can be as low as 0.25% of the loan amount to 6% or even higher, making your loan extremely expensive. At times companies do not highlight this, and applicants are also unaware of this. For example, a company would offer a personal loan at 8%, which would appear very reasonable. Still, at the same time, the applicant will be charged a processing fee, which could be as much as 7%, making the loan expensive.
Preclosure charges:
If the borrower wants to close a particular loan by paying it in full, the bank levied a charge on that. One should always go for a loan with a minimum or no pre-closure amount. Like prepayment, there is a lock-in period for pre-closure as well. So, minimum the lock-in better the loan.
Prepayment charges:
Like preclosure, one can also pay a portion of the loan before the scheduled time. Some banks charge a good amount of money as prepayment charges, and some do not. Hence, one needs to go with the bank charging a minimum amount as prepayment. At the same time, some banks also have a lock-in period of 12 months, and one can not close an account within that period.
Late Payment Charges:
Banks also charge late payments if you cannot deposit your EMI on time; this can be anything between a small amount, like INR 400, to 5% of the EMI. This penalty is also compounded if you miss it for a few months. If you foresee a possibility of missing an EMI go for a bank with fewer late payment charges. Still, people who think they have credible sources to pay the EMIs can ignore this factor as, at times, companies who relax in late payment charges may have increased interest rates.
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