What is a Loan Against Property (LAP)? All you need to know

Arranging a large sum of money through unsecured loans like personal loans can be both challenging and time-consuming. High interest rates, rigid approval norms, and short repayment periods often become deterrents for many borrowers. In such scenarios, a Loan Against Property (LAP) can serve as a practical financing solution. It allows you to leverage the value of your property to access significant funds.

IDFC FIRST Bank comes with a LAP offering that can go up to 80% loan of the current market value of the property, competitive LAP interest rates, extended repayment tenures, and various borrower-friendly features to help you meet your goals with ease. Let’s understand what a LAP is and whether you should opt for it to meet your needs. 

Do you need a loan against property?
 

A mortgage loan or LAP is one of the most versatile loan products available. It offers flexibility in terms of usage, allowing you to meet both personal and business-related financial requirements. Some common purposes for which you may consider a LAP include:

• Expansion of business: If you are a business owner aiming to scale operations, a LAP can provide the required capital without affecting your existing cash flow.
• Marriages: Planning a wedding involves considerable expenditure. A LAP ensures that you do not compromise on your family's big day.
• Medical treatments: Health emergencies can be financially draining. This loan gives you immediate access to the required funds for treatment.
• Education of children: Higher education, especially overseas, can be expensive. A LAP can help you fund your child’s academic aspirations.
• Other businesses or personal goals: From starting a new venture to fulfilling long-pending personal plans, a LAP can be the right financial instrument.

Benefits of loans against property
 

When you avail a loan against property from IDFC FIRST Bank, you can enjoy a host of benefits designed to simplify your borrowing experience:

• Competitive interest rates: IDFC FIRST Bank offers attractive LAP interest rates starting at 9.5% per annum, helping you manage your EMIs comfortably.
• Long repayment tenures: Enjoy repayment periods of up to 25 years, making it easier to plan your finances without stress.
• Continuous ownership of the property: Even after availing the loan, you retain ownership of your property, ensuring peace of mind.
• Ownership type: Whether you own a residential, commercial, or industrial property, you can leverage its value to opt for a loan of up to ₹15 crores.  
• Easy balance transfer: You can conveniently transfer your existing LAP from another financial institution to IDFC FIRST Bank to take advantage of better interest rates and features.

What are the eligibility criteria to apply for a LAP?
 

To apply for a loan against property from IDFC FIRST Bank, you must be a resident of India and meet the following eligibility criteria:

Salaried employees
 

• Age: Between 21 to 60 years
• Employment type: Should be working with a private company, public company, or a multi-national corporation

Self-employed applicants
 

• Age: Between 23 to 70 years
• Income Requirements: Must show regular income through business turnover as per the bank’s assessment guidelines

Applicants must also possess a clear title to the property being mortgaged and meet the required creditworthiness parameters set by the bank.

Documents required to apply for a LAP
 

When applying for a LAP, having the right documents ready helps streamline the loan process. The documentation may vary slightly based on your profile (salaried or self-employed), but broadly includes:

• Identity proof: PAN card, Aadhaar card, passport, voter ID, or driving licence
• Address proof: Utility bills, rent agreement, or passport
• Income documents:
  • Salaried: Latest 3 months’ salary slips, Form 16, bank statements
  • Self-employed: ITR for the last 2 years, audited financials, GST returns, and bank statements
• Property documents: Title deed, approved plan, sale deed, or lease agreement
• Photographs: Passport-sized photographs of all applicants and co-applicants
• Other requirements: Existing loan details (if any), and business registration certificate in case of self-employed professionals

What are the risks involved with loans against property?
 

While a loan against property offers several advantages, it is important to be aware of associated risks:

• No tax benefits: Unlike home loans, a LAP does not offer any direct tax exemptions.
• Various checks conducted: The loan is subject to credit score verification, income validation, and property assessment.
• Bank owns right to sell: In the case of default, the bank has the right to take possession and liquidate the mortgaged property to recover the dues.

Borrowers should assess their repayment ability before availing a LAP to avoid potential risks.

Conclusion
 

A loan against property is a smart financial option for those who require large funds at relatively lower costs. Whether you are planning for your child’s education, expanding a business, or managing unforeseen expenses, a LAP provides the flexibility and liquidity you need. IDFC FIRST Bank enhances this offering with customised solutions, competitive mortgage loan rates, and a commitment to quick and transparent service. If you are looking for a dependable LAP partner, consider IDFC FIRST Bank to benefit from its customer-first approach and attractive loan offers.