Emergency requirements of funds can come at any time and can arise for any person. If you are looking to get a relatively large amount of money in a very short time, you do not have many options. The best choice to get immediate funds for most people is to check their eligibility for Loan Against Property. For it is a secured debt that can be availed from both banks and NBFCs. The lender will assess the value of the property that you own and want to pledge as collateral. Subject to meeting some pre-set criteria, you can avail of a loan while the bank will take property papers in its possession. Once the loan is paid off, you will get your property papers back. Not everyone is eligible to take out a Loan Against Property.
Here is a quick checklist of factors determining eligibility for Loan Against Property.
The basic principle of Property Laws says that no person can transfer, pledge, or alienate a title on any property that is higher than what he himself holds. In the simplest terms, you must be the owner of the property that you want to keep as a pledge in LAP. If you are taking a Loan Against Property, you must be the owner of that property as per the government (municipal corporation) and tax records. Ownership of property is commonly determined through the title deed of the property, which must be in the name of the borrower. Keep in mind that a person cannot pledge joint property alone. To pledge a jointly owned property, all joint owners must become co-applicants on loan. Similarly, the property with a power of attorney becomes a matter of concern for a lender. Consequently, only case-to-case decisions are made by lenders on such property.
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Loan Against Property is a secured debt, and banks will offer lower interest rates and higher amounts than unsecured debts like Personal Loan. But the bank will always want to make sure that they get their money back. As a result, they will only offer loan amounts based upon the income of the borrower. For example, SBI Loan Against Property requires that any applicant who wants to take a LAP must show a salary income of at least Rs 25,000 per month. Even then, the bank will only offer you loan amounts where your EMI will not be more than 60% of your Net Monthly Income, as long as your annual income is above Rs 10 lakhs. Lower incomes will mean lower loan amounts. Incomes between 5 to 10 lakhs will get you 55% of salary to EMI ratio, and anything lower will bring you down to just 50% NMI to EMI ratio.
Almost all lenders will require that the borrowers be a citizen of India. NRIs and PIOs are only eligible for getting Loan Against Property if certain specific criteria are met, and that too on the discretion of the lender and some regulatory approvals. Similarly, many lenders will only give loans to people who are residents of certain areas. Bajaj Finserv Loan Against Property is only lent to residents of Ahmedabad, Aurangabad, Bangalore, Chennai, Cochin, Delhi, Hyderabad, Indore, Kolkata, Mumbai, Pune, Surat, Thane, Udaipur, and Vizag. SBI will restrict how much they will lend, depending upon where the property in question is located. If the property is in any rural or semi-urban area where the population is below 1lakh, they will not lend on that property. Loans of up to 1 crore are available on non-BPR urban centres and up to 2 crores for BPR urban centres. Loans up to 5 crores are available for property located in designated metro cities.
Here is a comparative study of Loan Against Property from some of the top banks and NBFC in India.
In order to take a Loan Against Property many banks and lenders enforce a minimum and maximum age limit. Bajaj Finserv’s age-based Eligibility for Loan Against Property is between 33 and 58 years for salaried individuals. For self-employed individuals, their age criteria are between 25 years and 70 years. SBI enforces age-based exit criteria. SBI LAP must be liquidated before the eldest borrower attains the age of 70 years. In any case, a minor is never eligible to take out a Loan Against Property.
Tax documentation for Loan Against Property can be divided under two heads. The first head is the tax documentation of the person who is borrowing the loan. This will include the PAN number issued by the Income Tax Department. PAN number is an absolute must. In case PAN is not available, most lenders will simply toss the application. Lenders will also ask for Income Tax Returns of the borrowers for the last three years. This can be obtained from the online income tax filing portal. For people who are earning a salary or who are self-employed but get TDS, the lenders will also ask for Form 16. The second head is the tax documentation of the property being pledged. This will commonly include municipal taxes and property taxes applicable to the property. The owner must clear all tax burdens of the property before and during the period in which the property is pledged.
KYC documentation includes the set of pre-defined identity and address proofs of the borrower or all co-borrowers. Common KYC documents include Aadhaar Card, Passport, Driving License, and Voter ID card. Generally, two of these are required, which means that if you are giving the Voter ID card as identity proof, you will have to submit a passport copy as address proof. These documents may be required at the time when the loan is taken and sometimes even during the loan duration. You will be required to present the originals at the time of application and submit copies with it. Original KYC documents are commonly authenticated on the spot and returned to the applicant.
As with any other product, different banks and NBFCs have set their specific criteria about Loan Against Property. The best approach is to find out the exact details by comparing lenders and picking the perfect match.
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