About Loan Against Property
A Loan Against Property is a type of loan against a self-owned property, wherein the amount would depend on your property's market value. It can be used for any purpose, just like a personal loan. The rate of interest depends on the loan amount, borrower's eligibility, credit score, and other factors. Just like in the case of home loan, the property is held by the bank as mortgage until you repay the loan amount entirely.
Types of Property Eligible for Loan Against Property
The property must be owned by the applicant(s) themselves and it must be as per the standards specified by the lender. The below types of property can be pledged to avail Loan Against Property:
- The residential property where the applicant is staying and/or rented property owned by the applicant.
- Commercial property owned by an individual applicant and/or a group
- The plot of land owned by individual and/or group of individuals
What is a Loan Against Property Calculator?
The repayment of a Loan Against Property is made in EMIs (Equated Monthly Instalments), which is paid to the lending institution every month. The EMI is a fixed amount calculated as per the loan amount sanctioned, tenure, and rate of interest. The bank calculates the EMI amount during your application process and determines whether you are capable of providing that amount every month from your income.
The formula for calculating the EMI is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where p = Principal amount
R= Rate of Interest
N = Tenure in months
As you can see, calculating the EMI is a fairly complicated process, which is why most vendors provide a tool called Loan Against Property Calculator or EMI Calculator to simplify the process of calculating the EMI.
Eligibility for Loan Against Property
The eligibility criteria for Loan Against Property is quite similar to the eligibility for Home Loan. Below are mentioned the eligibility criteria for Loan Against Property:
- The applicant should be a citizen of India or NRI (Non-Residential Indian) or PIO (Person of Indian Origin).
- Applicant must be between 24 to 70 years of age
- The applicant can either be self-employed or salaried
- Non-individual applicants are also eligible for a Loan Against Property provided they are able to furnish enough documentation stating the group's ownership of the concerned property.
- Salaried employees should have at least 2 years of experience to avail the loan
- Self-employed individuals should also have at least 2 years worth business experience
- All applicants need to have a regular stream of minimum monthly income as specified by the bank.
- Lease Rental Discounting facility is offered for applicants who have rental properties. In this case, loan can be availed by showing regular rental receipts. The loan will be paid off by the rental income.
- The loan amount depends on the value of the property and the requirement of the individual. The income of the applicant is also considered while deciding the loan amount.
- A credit score is required for the bank to provide you with the loan. A credit score of 650 or higher is accepted by the bank for Loan Against Property.
*The criteria may differ according to different banks.
Features of Loan Against Property
Below are some common features of Loan Against Property:
Loan Against Property comes with a low-interest rate. At present, the rates start from 8.70%.
Many banks offer higher repayment tenure so that the borrowers can have more time to repay the loan. Tenure may go up to 20 years.
The loan can be availed for any purpose such as personal use, business use, education purpose, medical purpose, and so on.
The processing fee is very low for Loan Against Property and may start from 0.5%, depending on the bank you are applying with.
Prepayment charges can range from NIL to 4%, depending on the institution you are applying with.
Stamp duty/other charges
As applicable as per the law of the State
Types of Loan Against Property
There are mainly the following three types of loans against property available in India:
1. Loan Against Property
This loan is offered against the mortgage of any self-owned property.
Key features of this loan are as follows:
- Purpose: Loan Against Property can be availed for personal, business, educational, medical, and other purposes.
- Amount of loan: You can avail a loan up to 90% of the property' market value, depending on the loan amount required and the lender you have chosen.
- Margin: A margin of minimum 10% needs to be arranged by the borrower
- Interest: Interest rate starts at 8.70%
- Tenure: A tenure of up to 20 years is provided by many lenders
- Security: Since Loan Against Property is a secured loan, a self-owned property is required as security or collateral.
- Processing fee: Processing fees are usually low and may start from 0.5% of the loan amount
- Benefits of Taking Loan Against Property:
- It can be availed against different kinds of property
- Interest rates are very low as compared to other kinds of loans
- It can be availed for different purposes
- Balance transfer facility available
- Easy way to avail funds instead of having to sell the property
- Flexible repayment options
2. Lease Rental Discounting
Lease Rental Discounting is a loan offered against rental properties by showing rental receipts.
The key features of this loan are:
- Purpose: The loan can be availed for any purpose like a regular Loan Against Property
- Amount of loan: The loan amount depends on the property value. Up to 60% of property value can be availed as loan.
- Margin: The margin offered is 15% of future rentals 50% of total rental value
- Tenure: Lower tenure is provided as compared to Loan Against Property. Tenure offered is up to 9 years.
- Interest: Rate of interest starts from 9.80%
- Security: In the case of a lease rental discount, the security can be the rental receipts from previous rents.
- Processing fee: The processing fee is quite less for lease rental discount and starts from 0.5%. The processing fee will be taken partly at the time of application and partly after the loan is disbursed.
- Prepayment charges: Prepayment charges would be NIL to very minimal if the applicant is an individual, but in the case of a non-individual applicant, the charges might be more starting from 3%.
- Benefits of Lease Rental Discounting:
- Can avail loan against rental income, putting it to good use
- No need for mortgage/sale of property
- An easier way to get urgent finances
- Flexible payment options
- Low rate of Interest and easy EMI
3. Overdraft Facility Against Property
Overdraft facilities entail the sanction of an overdraft account that contains the amount of funds agreed upon by the bank and that the borrower is free to withdraw from as required.
The key features of this loan are:
- Purpose: This dropping overdraft facility can be used for working capital requirements for running a business.
- Tenure: No fixed tenure as it is a running account
- Repayment: The repayment starts from when the overdraft is approved. The interest applies to the amount availed.
- Interest: The rate of interest is low and starts from 9.80%. The rate of interest depends on the limit of the overdraft account and the eligibility of the applicant.
- Margin: A margin of 40% to 55% is stipulated
- Security: The overdraft account is usually provided against a property. That is why applicants need to be able to provide security.
- Processing charge: Processing fees are usually low and start from 0.5% of the loan amount availed or up to a certain fixed amount mentioned by the bank. The processing fee is taken halfway at the time of application itself and half when the loan amount gets disbursed.
- Prepayment charge: Prepayment charges would be NIL to very minimal if the applicant is an individual, but in the case of non-individual applicant, the charges might be more starting from 3%.
- Benefits of Overdraft facilities against property:
- Money can be withdrawn in any amount and any time as required
- A recurring amount present until one lump sum amount paid
- Low-interest rates
- Flexible repayment options
Documents Required for Loan Against Property
Similar to home loans, for acquiring Loan Against Property, there are certain documents that have to be provided along with the application form. Some of these documents are mandatory and failure to provide can mean rejection of the application.
Below are some documents that are required for Loan Against Property:
- Application form filled with all the relevant fields and 2 photographs attached
- Identity Proof - Any of the following is accepted:
- PAN card
- Aadhar card
- Driving license
- Proof of residence - Any of the following is accepted:
- Aadhar card
- Gas bill
- Electricity bill
- Bank account statement
- Documents for salaried employees:
- Proof of income for the last 6 months, such as salary slips or bank account statement of 6 months showing salary credited to account.
- IT returns or Form-16 for the past 2 years
- Documents for self-employed individuals:
- Proof of business existence (company details, company address, etc.)
- Proof of income from business for the last 2 years
- Profit and loss sheets of business for the last 2 years
- Income tax or TAN details and papers for the last 2 years
- Original property deeds such as conveyance, sales deed, property tax receipt, construction permit, etc.
- In the case of NRI or PIO, proof of nationality and overseas account details. Also, you need to showcase the bank account in India with sufficient funds.
- Rental receipt in case of Lease rental discounting
- In case of any existing loans, proof of the EMIs being paid
Why should I Apply for a Loan Against Property on MyMoneyMantra?
These days, there are a lot of banks and financial institutions offering a wide variety of financial products and services. Many of these institutions also offer the facility of Loan Against Property with different eligibility and features. It can be difficult for the applicant to check out all the various features and come to a decision regarding the same. Moreover, loans are long term and high risk and should be decided carefully.
Financial marketplaces exist to make this process a bit easier for the applicant. MyMoneyMantra is one such online financial marketplace that enables its customers to sift through the ocean of financial products offered and choose the one that is most beneficial to them. MyMoneyMantra offers its services both online and through offline branches making it easily accessible to the customers.
Below are some benefits of applying for a Loan Against Property on MyMoneyMantra:
- Determines the eligibility criteria as per your personal details, age, income, etc.
- Analyzes your finances and gives you a clear idea about your financial strength and standing along with details of your liabilities.
- Professional guidance regarding credits and how to handle them
- Helps generating a credit report and making sure that there are no errors in it
- Offers a professional comparison between different banks regarding features and benefits offered.
- Helps with choosing the best loan product suitable for you to pay long term
- Helps with availing the best possible EMI for yourself
Benefits of Using a Loan Against Property Calculator
- No need to do complex calculations by yourself
- An easy and convenient way of getting your EMI
- Easy to use tool widely available all over the Internet
- No special knowledge needed
- Flexibility to change the tenure and amount to verify that the EMI is suitable for you
- Free service provided by MyMoneyMantra
Why Use a Loan Against Property Calculator?
The EMI calculation is a very important part of your loan application process as you will have to pay the EMI long-term. You need to ensure that the EMI is comfortable enough so that you can pay it every month. Moreover, the bank will also analyse your eligibility as per your EMI, by checking whether you have enough disposable income to cover your EMI amounts. For this reason, it is important to calculate your EMI beforehand so that you are sure of the loan amount and tenure you need.
As you saw above, the EMI calculation can be a complicated process. Fortunately, Loan Against Property Calculators exist to make the calculation easier for you. You just need to enter your loan amount, tenure, and rate of Interest and hit calculate. The tool will return your instalment amount for you. Using the tool, you can check against different tenures and amounts to see which amount would be most suitable for you in long term. Using the tool, you can also finalise the amount and tenure for the loan.
How to Use MyMoneyMantra Loan Against Property Calculator?
MyMoneyMantra provides you with professional guidance relating to all your financial needs. We also have a Loan Against Property Calculator or EMI Calculator available on our website so that you can go through the process of calculating your EMI conveniently. The Loan Against Property Calculator is easily accessible and can be used by anyone who wishes to avail the service.
Below are the steps you can follow to use the MyMoneyMantra Loan Against Property Calculator:
- Go to MyMoneyMantra's website
- Under Financial Tools, select EMI Calculator
- Enter details like amount, tenure, and rate of interest of your loan
- Then, hit the 'Calculate' button to get instant result
Frequently Asked Questions
Can I offer my commercial property owned by my company as a collateral for Loan Against Property?
Yes, Loan Against Property can be availed by companies or groups for commonly owned commercial properties. You will have to prove the ownership of the property and also provide the proof of the company's business and profits to be eligible for the loan.
Can I avail Loan Against Property for the purpose of repair and renovation of my house?
There are no restrictions on the usage of the loan amount availed through Loan Against Property. It can, therefore, be used for renovation purposes if required.
Why do I need to use a Loan Against Property Calculator?
It can be very difficult to calculate the EMI manually through so many complex calculations. The Loan Against Property Calculator will do the calculations for you very quickly and return you a highly accurate result.
Is the MyMoneyMantra Loan Against Property Calculator free to use?
Yes, MyMoneyMantra Loan Against Property Calculator is completely free to use tool and can be used by anyone with a basic internet connection.
How can I choose which loan type to go for?
The type of loan you should go for depends on your requirement and the type of property you have. For example, in case of a self-owned current property (commercial or residential), it would be ideal to go for a Loan Against Property. In case of a rental property from where you have been receiving rent regularly, you could go for a Lease Rental Discount. In case you require regular frequent funding, you could go for Overdraft facility.