Best Loan Against Property Interest Rates in India 2021

08 Aug 2021 // 38 min read // Loan Against Property
Author :(516 posts)
Best-Loan-Against-Property-Interest-Rates-in-India-2021_1 (1).jpg

A loan against property or LAP permits the owner to leverage their property/land for raising funds to mitigate their personal or business requirement without actually losing out on the ownership of their property. As they are secured in nature, loan against property interest rate is lower than other unsecured credit options, and lenders often take a less stringent analysis towards credit score while assessing the borrower’s creditworthiness. But this ease of approval usually makes many of the borrowers avoid some vital facets. 

Here, first, we will discuss certain crucial aspects that applicants generally avoid when applying for a loan against property. Next, we will discuss the present loan against property interest rate, which bank is best for loan against property, eligibility criteria regarding LAP, documents required, and why using the LAP EMI calculator is crucial before opting for this credit option. 

Crucial aspects usually avoided by a loan against property applicants: 

 Avoiding comparing rate of interest of different lenders 

 Loan against property interest rate ranges anywhere between 8.20% and 14.50 % based on the lender's evaluation of their credit risk concerning the applicant’s credit profile. The interest rate of LAP may even vary basis the loan amount and the loan repayment tenure that the borrower opts for. Thus, the ones planning to take up LAP must first compare LAP offers from multiple lenders. They must start their hunt for LAP by first visiting the bank/HFC with whom they already share an existing customer relationship. After this, they must visit the online financial markets for comparing LAP offers being provided by various other lenders. The final application for LAP must be with the bank/HFC that is charging you the lowest rate of interest for optimal loan amount and loan repayment tenure. 

 Avoiding to factor in the processing charges and prepayment fees

 Apart from loan against property interest rate, processing fees charged by a lender is the next crucial factor to be considered. Processing charges that are charged by maximum LAP lenders generally range from 1 % to 2 % of the loan amount. As this credit option involves a big-ticket loan amount, their processing fee too may be of a sizable amount. Hence the LAP applicants should always ensure to factor in their processing charges before making the final application with a specific lender. 

 According to the guidelines set by RBI, LAP taken upon floating rates come with no prepayment charges. But lenders who provide LAP on fixed rates might charge prepayment or foreclosure fees. As opting for the prepayment route when fixed-rate LAP is concerned can cost a huge amount, always consider opting for floating rate LAP. Doing this may enable you to opt for a prepayment option without having to pay any charges in the form of prepayment fees. 

Not selecting loan repayment tenure based on repayment capacity.

 The loan repayment tenure of any credit option plays an important role in deciding the loan EMI and complete interest cost. Higher loan repayment tenures may lead to reduced EMIs but result in increased interest costs. The opposite stands true in the case of loans available at shorter repayment tenures. As LAP repayment tenure can go as high as 15 or 20 years on the basis of the lender, one should choose the LAP repayment tenure based on their repayment capacity. Choose shorter loan repayment tenures just if you are completely sure of meeting your EMIs timely without any requirement to compromise on your monthly contributions towards important financial goals. The ones who cannot just stick with longer loan tenure to repay lower EMIs as failure to meet timely EMIs can lead to steep penal charges, which in turn negatively affects their credit scores as well as their loan and credit card eligibility prospects. Those borrowers choosing longer repayment tenures have always the option open to lower their interest cost by opting for prepayments whenever they avail surplus funds. 

Failing to factor in the disbursal time at the time of availing loan

 LAPs disbursal generally takes near to two to three weeks because the lenders require verifying all your property documents as well as conducting technical study when evaluating the property’s market value before accepting the LAP application. Hence, LAP may not be the right match for the ones with instant fund requirements. These applicants must, instead of opting for LAP, must consider opting for a personal loan or any other credit option with a shorter disbursal time. 

Ignoring to factor in LAP’s EMI into an emergency fund

 Financial exigencies like job loss, illness, accident etc., are uncertain in nature and can occur anytime, which can hamper your income, cash flows and also your capacity to meet loan EMIs. Though one can always rely on their existing investments for repayment of their loan EMIs, doing this can negatively hamper their financial health for the long term. To meet such risk arising owing to unexpected emergencies, borrowers must also ensure to consider their existing EMIs into their contingency fund. Note that a contingency fund must be adequate enough to mitigate your unavoidable expenditures for nearly 6 months or even more. Thus, when you begin with your plan for LAP, ensure to simultaneously increase your emergency fund by around 6 times the expected LAP’s EMI. As financial emergencies can occur anytime, remember to park your money in financial instruments which are liquid in nature, such as bank fixed deposits and high yield savings bank account. 

Best Loan Against Property Interest Rates

 A loan against property or LAP is even addressed by the term mortgage loans. They have secured credit options wherein borrowers require pledging their property, either commercial or residential, as security or collateral. The current loan against property interest rate may range anywhere between 8.20% p.a. and 14.50% p.a, and the loan repayment tenures can go up to 20 years. 

Which Bank is Best for Loan Against Property in India?

The question ‘which bank is best for loan against property’ must be one of the initial questions of applicants looking for a loan against property from a suitable lender. Presently, banks offering loans against a property interest rate of below 9 % p.a include Bank of Baroda (BoB), Union Bank of India, Bank of Maharashtra, HDFC Bank and State Bank of India. 

Below with the help of a loan against property interest rate table, we have illustrated ‘which bank is best for loan against property. 

Loan Against Property interest Rate & Charges
LenderRate of interest (%) P.AProcessing charges (% of the loan amount)Loan amount (Rs)Maximum loan repayment tenure
Bank of Baroda8.20 - 13.851 % (Maximum 1.50 lakh)Up to 10 crore15 years
Union Bank of India8.40 - 10.651 % (Rs 5,000 - Rs 1 lakh) 5 lakh - 10 crore15 years
Bank of Maharashtra8.55 - 9.551 %Up to 5 crore15 years
HDFC Ltd. 8.75 - 11.55Up to 1.5 % (Minimum : Rs 4,500)Differs for existing & new customers*15 years
State Bank of India8.80 - 9.651 % (Maximum Rs 50,000)Up to 7.5 crore15 years
Karur Vysya Bank9.00 - 12.000.50 %10 lakh - 3 crore100 months
PNB Housing9.50 - 11.002 %Up to 60 % of the market value of property 20 years
Canara Bank9.95 - 12.000.50  %(Minimum Rs 5,000)Up to 10 crore10 years
Federal Bank10.10 onwards1 % (Minimum Rs 3,000) Up to 5 crore15 years
Tata Capital10.10 onwardsUp to 2 %10 lakh - 3 crore15 years
Bajaj Finserv10.10 - 14.50Up to 6 %Up to 3.5 crore20 years
Indian Bank10.50 - 10.651 %Up to 5 crore15 years
* *Existing customers: Up to 60% of property's market value (The principal outstanding on all existing loans and the LAP being availed should not cumulatively exceed 60% of the Market Value of mortgaged property). For New customers: Generally up to 50% of property's market value. 
Data as of 30th July 2021

Eligibility Criteria

 Whenever a customer submits an application for LAP, financial lenders consider the applicant’s eligibility. A few of the factors that are considered for checking the eligibility of the LAP applicant are the applicant’s age, income, nature of employment, property’s value etc. Based on such factors, financial lenders either reject or approve the applicant’s LAP application. 

Documents Required

Below, we have provided some of the main documents that the lenders ask for before processing the applicant’s LAP application:

  • Identity proof: Aadhaar card, passport, PAN etc.
  • Form 16
  • Address proof - Driving license, aadhaar card, voter ID etc.
  • Bank statement
  • IT returns certificate
  • Income proof document
  • Salary slip
  • Property document - registration certificate, sales deed, building plan, property tax receipt, building plan approved by Municipal Corporation etc.

Loan against Property EMI Calculator

For planning one’s finances in advance, applicants must take the help of the LAP EMI calculator for knowing how much they should set aside per month for repaying the EMI. LAP EMI factors in parameters like loan amount availed, applicable loan against property interest rate and the loan repayment tenure.

 For instance, suppose Mr X availed a LAP of 45 lakh for a loan repayment tenure of 10 years with a rate of interest of 9% p.a. Considering the principal amount and loan against property interest rate divided by the loan repayment tenure, Mr X will require repaying a LAP EMI of Rs 57,004 with total interest payable being Rs 23,40,509 and total payment summing to Rs 68,40,509.  

FAQs

✅Which bank is good for loan against property? 

 Loan against property interest rate of below 10 % p.a is offered by Bank of Baroda, Union Bank of India (UBI), Bank of Maharashtra, HDFC Ltd, State Bank of India, Karur Vysya Bank, PNB Housing and Canara Bank. 

✅How much loan can I get against the property? 

 The highest loan amount that you can get against your property can go up to Rs 10 crore. Lenders offering maximum Rs 10 crore loan amount on LAP are Bank of Baroda, Union Bank of India and Canara Bank.

✅Is a loan against property a good idea? 

Yes, a loan against property is a good idea for those in need of big-ticket funds to meet their financial emergencies or monetary shortfalls. Owing to its secured nature, LAP lenders usually may avoid the requirement of factoring in the credit score of the loan applicant when evaluating his/her application. Thus, it may be the best choice for those with security in the form of the property but lacking a good credit score of 750 and above. Moreover, like a personal loan or loan against credit cards, the loan proceeds of LAP can be used for any specific purpose like funding a child’s higher education or marriage, renovating or improving a home, medical expenses etc. However, note that as this credit option’s processing time may take nearly 2 to 3 weeks, those in instant need of funds may not find it to be an appropriate loan option. Such individuals may opt for other credit options like instant personal loans or loans against credit cards to meet their instant fund requirements or mismatches.

✅What is the procedure for a loan against property? 

One of the initial procedures involved before zeroing on any LAP lender is to compare among various LAP lenders on the basis of loan against property interest rate, processing fee, offered loan repayment tenure etc. The comparison procedure can be carried out by approaching online lending marketplaces. Note that the final application should be with the lender charging the lowest rate and charges for an optimal loan tenure and LAP amount.

✅How long does it take to avail a loan against property? 

Processing of loan against property usually takes a period of 2 to 3 weeks. Thus, those in instant need of funds in case of financial emergencies may not find a loan against property a suitable option. Such individuals can opt for a loan against credit card or personal loans as such credit options come with shorter processing time.