Wednesday, 11 April 2018

On What All Properties Can I Get Lap?

LAP or Loan Against Property as the name suggests is a loan sanctioned against property and this makes it a secured loan. While most banks offer LAP, the eligibility conditions and also the product features may vary from one to another. LAPs can often be used as an alternative to personal loan when in need of funds as the interest rates for these loans is much lower than that of personal loan. Approval is quick and documentation required is minimal; however the crucial question that arises is what are the properties against which these loans can be secured?

On What Properties Can You Get LAP?
To put it broadly a loan against property is available for a self occupied residential properties, any plot of land or a commercial property. An important requirement for this loan requires that the applicant (owners) have full control over the property without any restrictions what so ever. In case of joint ownership, all owners have to be co-applicants for the loan which means all owners have to be on board for the idea of taking a loan against that said property.

Most lenders do mention the property type against which they might be willing to give a loan. As per the SBI website the loan is available for “non-encumbered, non-agricultural and SERFAESI compliant residential house/flat in the name of borrowers/guarantors. However, loan under this scheme will not be made available on mortgage of an open plot, commercial/industrial property and under construction property”.  This is a fairly broad definition which reveals that SBI does not offer loans against agricultural land or open loans or under construction property.

Both ICICI and HDFC bank list that the loan can be secured for residential as well as commercial property owned by the applicant. Getting a loan against vacant land can be a challenge as most lenders may not see it as an economically viable option in case of default. A vacant land will not be easy to rent or dispose of in case it is required by the bank to do so. Small or local lenders may agree to do so but it will depend on each lender’s policy. However most lenders would be willing to offer a construction loan if the applicant requires that to build a house on a piece of land owned by him. Eligibility criterion for these (construction) loans, although similar to home loan eligibility criterion varies from lender to lender.
Lender may differ on their policies regarding what is acceptable to them as collateral for a LAP  thus one should check with the individual lender or visit their website before looking at applying for the loan.
Loan Against Property Eligibility Criteria:
Like any loan there are eligibility conditions for getting a LAP sanctioned. Though these may vary from one lender to another but some basic conditions remain same.  So if you want a LAP you should fulfill the following conditions (generally), rest can be checked at the lender’s website.
Ø  Salaried employees who are permanent employees and professionals like architects, doctors, CAs, engineers etc can apply for it.
Ø  Self employed people can also apply for these loans as long as they pay regular income tax.
Ø  A good credit rating is also a must for the loan to be sanctioned, low CIBIL score could be an impediment in getting the loan sanctioned.
Ø  Some lenders may have minimum income eligibility criteria while others may assess the income, current debt and expenditure levels to assess if the borrower will be able to repay the dues.
Ø  Value of property is an important criterion when deciding about LAP.
If you have a property and you are in need of some quick funds then borrowing against it an option worth exploring however one should avoid taking a loan against a property that the live in or the one which is occupied by their family. If this is the only property owned then other options of borrowing should be explored.

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