Here’s how to get a Loan Against Property without Income Proof

You Can Get LAP Even Without Income Proof

Income proof is quite simple if you have a steady job and get a salary each month and have a salary slip to evidence the same. However, there are scores of people who are self-employed. These are people who have incomes but do not have the traditional documents to evidence such incomes. There is hope because you can still get a mortgage loan or loan against property, even without income proof.

Understanding Loan Against Property

A loan against property (LAP) or a mortgage loan is a back-to-back secured loan. In LAP, the borrower can offer their residential or commercial property or even a plot of land as mortgage to get a loan. This is back to back lending so the risk for the lender is much lower and hence you get lower rates of interest on loan against property.

There are some basic steps like an independent valuer appointed by the bank will assess the value of the property and that valuation will be the benchmark to determine the LTV ratio. For any loan, income proof and ability to service the loan is critical. However, small businesses or self-employed persons do not have adequate documents to evidence their income. Here we will understand how they can still get loan against property.

Valuable Tips To Get Lap With Limited Income Proof

This is a problem with a lot of people in India, who may have property and income but not enough means to evidence such income. What are the alternatives? While banks would obviously insist on income proof, as it involves servicing the loan, there are ways to get loan against property even with limited proof of incomes available.

• The most important rule in such cases is transparency. Explain your problem to the bank manager and if you have a good track record with the bank, they will be more than willing to help you out. For instance, you can apply with a co-applicant or co-borrower who can be a relative with steady source of income.
• Offer a financial guarantee through FD to the bank. Many banks would be willing to accept this. For instance, you transfer 12 months EMI into an FD at the bank and offer the first lien on the FD to the bank. They can draw down the FD in the event of any default in payment. That should be good safety net for the banker to offer you loan against your property.
• A guarantor can be of help in such cases. You must appreciate that the guarantor, to be acceptable to the bank, must be a person with a solid income source and a good credit standing. Guarantor has liability only in the event of your default.
• You can talk to the bank manager and settle for a lower LTV (loan to value) for the loan against property. For example, if the normal LTV offered is 65%, you can settle with the bank for 50% LTV, which should give greater comfort to the bank.
• One thing you can also do is in case you are earning rentals on that property, then you can opt for lease rentals discounting. Alternatively, you can go for loan against property and offer the lender the first lien over the lease rentals. That should evidence income and also give comfort to the bank.
• In many cases, when the income proof is not conclusive, the banks may hesitate to give a longer tenure loan. Loan against property generally has a maximum tenure of 15 years. If you are willing to settle for a 10 year LAP, then your chances of getting the loan even with limited income proof is quite high. Alternatively, you can also agree with the bank to pay a slightly higher rate of interest, which should be acceptable to the bank.
• Quite often, despite all these efforts and your best intentions, the banks may not be willing to offer you a traditional loan against property. In that case, you can look at other sources to fill the funding gap. For instance, there are several peer to peer (P2P) lending websites that can fill your funding gaps. Be cautious in such cases, that you don’t get caught in usurious loan traps or get exposed to loan sharks.

Yes, You Can Get LAP With Limited Income Proof

You do not have to be disappointed if your income proof is limited. You can still get loan against property if you talk to the bank manager, explain the problem and are willing to offer other proxies as evidence of your income. As long as the bank is convinced that your sources of income are legitimate and sustainable and your willingness to repay is high, you should be able to get loan against property even with limited income proof.