Loan Against Property (LAP) is a type of secured loan. A secured loan is a loan where the borrower mortgages his or her asset or property as collateral to the bank or the other lending institution. LAP could be used for several personal and professional needs such as house renovation, business expansion, purchase of a new machinery and other requirements. Typically the banks and other lending institutions offer loan against residential, commercial and industrial property. A borrower usually gets a fixed percentage of the property value known as LTV (Loan To Value) as loan amount against the property. The loan to value (LTV) varies from one bank to another. Usually, the loan to value ranges from 40% to 70% of the property value. The borrower can continue using the property that is mortgaged with the bank for its respective use.
However, both LAP and Personal Loan could be used for personal and professional needs but the interest rates of LAP are comparatively lower than a Personal Loan. This loan variant can be availed by salaried, self-employed professionals and self-employed business owners. The banks offer LAP either at the fixed rate of interest or at an adjustable rate.
Purpose of Loan Against property
Loan Against Property could be used for several purposes mentioned below:
- Purchase of a new property
- Purchase of raw material
- For immediate working capital requirement
- Acquiring a new machinery
- Investment in new technology for business
Eligibility Criteria for Loan Against Property (LAP)
To obtain Loan Against Property the borrower should fulfil the eligibility criteria. The following factors affect the loan eligibility of the borrower:
- Minimum 21 years (At the time of loan application)
- Maximum 65 years (At the time of loan maturity)
- However, the age may go up to 70 years and above in special cases.
Job Experience or Business Stability
- Salaried Employees: Minimum of 2-3 years
- Self-Employed: Cash profit of at least 3 years
- Good Credit Score
- (650 and above is usually acceptable)