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FinFIRST Blogs
Your quick guide to understanding LAP and Home Loans better
As the name implies, a loan against property (LAP) is exactly that! A loan given or disbursed against the mortgage of your property. This loan is given at a certain percentage of the property's market value, usually around 40% to 60%, which is what immediately differentiates it from a Home Loan.
Suppose a businessman, wishes to avail a loan against his Mumbai-home to repay a debt, fund new expenses, raise capital or cater to any emergency financial demands, he can avail a Loan against Property.
This type of a loan belongs to the Secured Loan category, where a borrower gives a guarantee by using his property as security.
There are 2 primary reasons why individuals opt for a Loan Against Property (LAP):
1. Low interest, lower EMIs!
Guaranteed lower interest rates, with lower to no prepayment charges:
2. Flexible and easy
While these loans are easier to get eligible for, the tenures offered are long and flexible. With a 100% digitized process on LAP, it’s as simple as it gets.
READ MORE
Let look at the 4 key differences between a Home Loan and a LAP:
| HOME LOAN | LAP |
| When do you apply for it? | When do you apply for it? |
| You can apply for a Home Loan when your new home is under construction or you are seeking aid in the process of purchasing of a new house | You can apply for LAP when you wish to seek funding against a Collateral, like a commercial or residential property for personal or business requirements |
| What is the loan amount based on? | What is the loan amount based on? |
| An evaluation of 85% - 90% of the house, based on market value | An evaluation of 65%-70% of the market value of your property. LAP in the case of commercial property completely varies from LAP against residential properties. |
| Interest rates: | Interest rates: |
| Range between 6.75% - 10%, depending on your loan amount and the bank of your choice | Ranging between 7.35% - 10.5% depending on your loan amount and the bank of your choice |
It is important to note here that some banks may also choose to lend against industrial property in some areas. Banks can either lend against self-occupied property or rented out property or even vacant property.
Sounds too good to be true? Hold your horses! Before you start applying, let’s take a quick look at what is the eligibility criteria to get a Loan Against Property.
Under all normal circumstances, the following factors are taken into consideration, while arriving at eligibility criteria for LAP:
- Income of the applicant
- Age of the applicant
- Property Valuation of the applicant’s residential or commercial property
- Existing Liabilities (if any)
- Current work experience of the applicant, work history and credit history to establish credit-worthiness
- Adherence to 100% submission of required financial documents
Let’s now take a look at the documents categorized under Salaried & Self-employed individuals, as listed below
For Salaried Applicants:
- Application form with photograph
- Identity and Address Proof
- Latest Salary Slips
- Form 16
- Bank Statements (Last 6 months)
- Processing fee cheque
For Self-Employed Applicants:
- Application form with photograph
- Identity and Address Proof
- Proof of business existence & Education Qualifications.
- Last 3 years' ITR
- Last 3 years' P&L and Balance Sheet
To continue reading, visit this detailed section on LAP. It’s a guarantee: All your questions around LAP will be answered in a giffy!
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
