FAQs on Loan against Property

    29th Nov 2018
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    1.What is loan against property?

    Loan against property is a secured loan wherein your property is used as collateral. The loan amount in these cases is directly proportional to the value of your property, and is an all-purpose loan. It is not limited to simply a home loan.

    2.Why should I obtain these loans?

    A loan against property is a secured loan, which means that it is easier to obtain when compared to a regular home loan, for example. Secondly, these loans generally attract a lesser interest rate as well.

    3.What are the advantages of obtaining these types of loans over a personal loan?

    Although both personal loans and loans against property are all purpose loans, there are certain benefits of obtaining the latter. They are:

    • Usually, personal loans have higher rates of interest as they are unsecured loans.
    • The loan tenure is longer in the case of loan against property. Tenures can go up to 15 years. Whereas, for personal loans, loan tenures are limited to 5 years in most cases.
    • Lastly, the processing fee for personal loans is higher than that of loans against property.

    4.Are these types of loans limited to salaried employees?

    No, a loan against property can be obtained by both salaried and self-employed professionals.

    5.Are NRIs eligible to opt for a loan against property?

    Many banks do provide these types of loans to NRIs. However, there are certain criteria one must meet, like the country of residence, for instance, and also depends solely on the bank’s policies.

    6.Do you need to specify the purpose of obtaining a loan against property?

    Most banks don’t require you to mention the purpose of obtaining the loan. However, it again depends on the lender you choose to obtain this loan from.

    7.Can we obtain this loan by pledging a commercial property?

    Both residential and commercial properties can be used as collateral to obtain a loan against property.

    8.What is the maximum loan amount on can avail?

    Most banks provide a loan that is equivalent to 60 – 80% of the market value of the property. However, there are several other factors that determine the loan amount, such as age, income, savings, etc.

    9.How will the value of my property be assessed?

    A formal valuation process will take place to determine the value of the property.

    10.What are the documents required to avail the loan?

    Documents required for a loan against property for salaried individuals

    Income proof

    • Three month’s salary slip and form 16

    Job proof (Any one of the documents mentioned below)

    • Employee certificate
    • Job appointment letter
    • Experience letter (Including previous employers)

    Bank statement

    • One year statement

    Photo ID (Any one of the documents mentioned below)

    • Driving licence
    • Passport
    • Voters ID
    • PAN card
    • Aadhaar card

    Address proof (Any one of the documents mentioned below)

    • Aadhaar card
    • Passport
    • Ration card
    • Utility bill

    Property ownership proof

    • Property documents
    • Electricity bill
    • Maintenance bill

    Property documents

    • Sale deed
    • Maintenance bill
    • Share certificate
    • Sanction letter from banker, if applicable

    Other documents

    • Processing cheque
    • Investment proof, if applicable
    • 1 passport size photograph

    Documents required for a loan against property for self-employed individuals

    Income proof

    • Three years income tax returns
    • Profit and loss account
    • Audit report
    • Balance sheet

    Business proof (Any one of the documents mentioned below)

    • Company registration licence
    • Shop establishment act
    • Tax registration copy

    Bank statement

    • One year statement of both current and savings account

    Photo ID (Any one of the documents mentioned below)

    • Driving licence
    • Passport
    • Voters ID
    • PAN card
    • Aadhaar card

    Address proof (Any one of the documents mentioned below)

    • Aadhaar card
    • Passport
    • Ration card
    • Utility bill

    Office address proof (Any one of the documents mentioned below)

    • Property documents
    • Electricity bill
    • Maintenance bill

    Property ownership proof

    • Property documents
    • Electricity bill
    • Maintenance bill

    Property documents

    • Sale deed
    • Maintenance bill
    • Share certificate
    • Sanction letter from banker, if applicable

    Other documents

    • Processing cheque
    • Investment proof, if applicable
    • 1 passport size photograph

    Documents required for a loan against property for Indian residents

    Bank statement

    • One year statement

    Photo ID (Any one of the documents mentioned below)

    • Driving licence
    • Passport
    • Voters ID
    • PAN card
    • Aadhaar card

    Address proof (Any one of the documents mentioned below)

    • Aadhaar card
    • Passport
    • Ration card
    • Utility bill

    Property ownership proof

    • Property documents
    • Electricity bill
    • Maintenance bill

    Property documents

    • Sale deed
    • Maintenance bill
    • Share certificate
    • Sanction letter from banker, if applicable

    Other documents

    • Processing cheque
    • Investment proof, if applicable
    • 1 passport size photograph

    11.How long does it usually take a bank to disburse the loan?

    Since it is a secured loan, it usually only takes about two weeks to disburse this loan.

    12.Does the property have to be insured?

    Yes, most lenders require you to insure the property before they disburse a loan against property.

    13.What is the repayment procedure?

    You can repay these loans like any other loan via EMIs. These EMIs can be paid via cheque or ECS (Electronic Clearing System).

    14.Can I prepay my loan?

    Loans against properties can be prepaid in most cases. However, these policies do vary from lender to lender. Therefore, it is advisable to check with the lender before opting to avail this loan.

    15.Can the loan be partially prepaid?

    Yes, these loans can be partially prepaid. However, as mentioned earlier, it is at the discretion of the bank.

    16.How is the interest calculated?

    The interest is generally calculated on a daily or monthly reducing balance method, as per the bank.

    17.What happens if the property is owned by several individuals?

    In this case, all owners will have to be joint applicants of the loan.

    18.Is it possible to avail a loan against property on a house given out on rent?

    Yes, rented houses too can be used as collateral to avail a loan against property. However, all the papers like the sale deed, etc., must be authenticated.

    19.Do banks consider your credit score before approving a loan against property?

    Although it is a secured loan, banks do consider your credit score before they approve these loans. Therefore, it is important to ensure that you have a good credit score before applying for these loans.



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