Introduction
You may be curious to know as to what Loan against Property (LAP) could be, right? Well, in today’s blog, we’ll be giving you a brief explanation of LAP, factors affecting the loan against property interest rates, and the documents required for a loan against property.
Loan Against property is basically a type of facility provided to individuals or businesses against the mortgage of a residential or commercial property, which is used as collateral in exchange for a loan until the entire amount is repaid in the form of EMI up to the set date. This is a secured type of loan.
The interest rate is much lower in comparison to unsecured loans. This scheme is sanctioned to a certain property value, depending on the lender’s policy. Depending on which bank you are taking the mortgage from, the property’s market value can vary from 90%-70%.
You can only mortgage a property under the ownership rights that belong to you.SBI Loan against Property is a type of loan that will help you unravel the concealed equities in your property holdings. You can turn this into your trump card by holding on to the property and simultaneously raising funds for your child’s education, future, wedding or an unfortunate medical emergency. Isn’t that amazing?
How does the credit score affect the loan against property interest rate?
The interest rates determine the overall costs and how much you will be paying back throughout the tenure. There are a number of factors that affect interest rates.
A credit score is an important aspect of SBI Loan Against Property (LAP) when it comes to taking out a loan. This will determine whether you are liable for getting the loan or not. A low credit score means you are unlikely to repay the loan. Hence, the interest rate will be high for you to counterbalance the risk of default and may also have a sterner approval criterion.
Key information regarding the property:
Value:
The value of the property plays an important role, too. The higher the rate for the property, the higher will be your chances of receiving a lower rate of interest.
Documentation:
The documents you provide act as evidence for the value of the property and your ownership. It sets out to be used as collateral for the loan you applied for.
Insurance:
The property’s insurance must be able to cover any damages caused in case of an occurrence. This will ensure the safety of the lender’s investment.
Here are a few documents required for a loan against property that we think will be helpful for you to know.
Common documents required:
- Property-related documents
- Proof of Business (self-employed)
- Account statements for the last 6 months
- Proof of identity-
- Passport
- Driving License
- Election Commission Voter ID Card
- Election Commission ID Card
- Proof of income-
- Parent Income Certificate
- Income Tax Return
- Form 16 by the Employer
- Salary Certificate
For Salaried Individuals:
- A copy of any of the following as proof of residence:
- Ration Card
- Telephone Bill
- Electricity Bill
- Voter's ID Card
- A copy of any of the following as proof of identity:
- Voter's ID Card
- Employer's Card
- Latest Bank Statement/Passbook from where you can show a salary/income being credited for the previous 6 months
- Salary slips for the previous 6 months showing all deductions
- Form 16 for the previous 2 years
- Copies of all the property documents of the concerned property to be pledged for the loan
For Self-Employed Professionals/Individuals:
- Certified financial statement for the previous 3 years.
- A copy of any of the following as proof of residence:
- Ration Card
- Telephone Bill
- Electricity Bill
- Voter's ID Card
- A copy of any of the following as proof of identity:
- Voter's ID Card
- Employer's Card
- Latest Bank Statement/Passbook from where you can show a salary/income being credited for the previous 6 months
- Copies of all the property documents of the concerned property to be pledged for the loan
Conclusion:
It is important to keep in mind that, if you are not able to repay the loan on time, the property may be auctioned in order to recover the loan. Hence, only borrow the amount that is required and repay the loan as per the terms and conditions.