check your eligibility
What is Loan Against Property?
If you need funds to cater to a personal or business emergency, a personal loan is an ideal option. However, personal loans have limitations, especially when your requirements are huge. Under such circumstances, a Loan Against Property is a better alternative. Both personal loan and Loan Against Property are similar in many ways, but they differ a lot, as well. The eligibility criteria for a personal loan are different from that of a Loan Against Property. They differ in many other ways, too.
Loan Against Property Vs Personal Loans
Before we proceed with discussing the differences between the two, let us compare the similarities:
- Both personal loans and loans against property help the borrower to cater to personal and business emergencies. These requirements can include medical treatment, marriage or educational expenses, and so on. From the business angle, these loans help you to tide over immediate working capital requirements or purchase of a long-term business asset.
- Banks and financial institutions do not seek the reasons for applying for personal loans and loans against property. The lenders do not have any issues as long as the end-use of the loan is not for speculative purposes.
Here are the aspects in which the Loan Against Property differs from personal loan:
- Personal loans are unsecured loans, whereas a Loan Against Property is a secured one
- Personal loan has smaller exposure limits when compared to Loan Against Property
- The eligibility norms for a personal loan differ from that of a Loan Against Property
- The CIBIL score requirement for a Loan Against Property is not as high as it is for a personal loan
- Usually, personal loans are not available in joint names, whereas borrowers can apply jointly for a Loan Against Property.
- The personal loan is always a term loan, whereas a Loan Against Property can be in the form of an overdraft facility.
- Personal loans are available for short tenures up to 60 months, whereas a Loan Against Property can have a mandate extending up to 20 years.
- The rate of interest on a personal loan is considerably higher than that applies to Loan Against Property.
- Compared to loans against property, a personal loan has a shorter TAT (turn-around-time)
A personal loan is ideal for meeting small requirements, whereas a Loan Against Property caters to more significant needs.
Loan Against Property - General Eligibility Norms
- A Loan Against Property has a minimum and maximum age requirement. Usually, the minimum age requirement is around 21 years, with the maximum being 65 years. It depends on the lending institution.
- Generally, both self-employed individuals and salaried persons are eligible for a Loan Against Property. The standard requirement is that the applicant should have a regular source of income.
- Joint applications are permissible in a Loan Against Property. The lending institution can accept the income of the co-applicants for arriving at the eligibility.
- The applicant should have unencumbered property in their name
- The property can be residential, commercial, or industrial. Agricultural land is not acceptable as security for the loan.
- Many banks stipulate that the property should either be vacant or self-occupied. Some of the banks do not consider a property that is let out on rent or lease to third parties.
- Some lending institutions sanction loan against vacant residential plots
- The margin on Loan Against Property can be 10% to 50% of the market value of the property
These are the general eligibility norms. It can differ from one bank to the other.
Loan Against Property - Advantages
- It provides you with an opportunity to get a lump sum amount to cater to personal or business needs.
- The Loan Against Property is cheaper when compared to a personal loan or an advance against the credit card.
- It is useful when the requirements are high
- The eligibility criteria for applying to a Loan Against Property are comfortable
- One does not need an excellent credit rating to be eligible for a Loan Against Property
- The Loan Against Property has an extended repayment tenure. Therefore, it is a convenient liability in many ways.
Loan Against Property - Eligibility Norms of the Top Banks and Lending Institutions
Following are the eligibility criteria for different Loan Against Property schemes offered by top lenders:
|State Bank of India - Eligibility Criteria|
State Bank of India offers three variants of Loan Against Property:
The eligibility norms for all schemes are mentioned below:
A) Loans Against Property
a) Annual Income more than 3 Lakhs and <= 5 lakhs: 50%
b) Annual Income > 5 Lakhs and <= 10 Lakhs: 55%
c) Annual Income > 10 Lakhs: 60%
B) Loans Against Mortgage of Immovable Property
a) NCR, Mumbai, Chennai, Pune, Ahmedabad, Bengaluru, and Hyderabad: 5 Crores
b) At other BPR centres: 2 Crores
c) At Non-BPR centres: 1 Crore
d) Rural and semi-urban areas with population up to 1 Lakh: Nil
C) Rent Plus Scheme - Loans Against Rent Receivables
a) 75% of the realisable value of the property
b) 75% of the net rent receivable for the residual lease/loan period
c) Maximum permissible amount in this scheme
|ICICI Bank - Eligibility Criteria|
|HDFC Bank - Eligibility Criteria|
|Axis Bank - Eligibility Criteria|
a) In permanent service in Government department or a reputed company
b) Should be above 24 years when applying for the loan
c) The maximum age can be the age of superannuation
a) Should file Income Tax returns
b) The minimum age is 24 years at the time of application, whereas the maximum is 65 years at the maturity of the loan.
a) Professionals include doctors, Chartered accountants, architects, and so on
b) Other eligibility norms are the same as that of self-employed non-professionals
Amount eligibility norms
Axis Bank also offers a Lease Rental Discounting facility
a) 85% of the present value of future rentals
b) 50% of the property value
|DHFL - Eligibility Criteria|
|Punjab National Bank - Eligibility Criteria|
a) Personal needs: 1 Lakh to 25 Lakhs
b) Business requirements: 5 Lakhs to 5 Crores
Assessment of limit - to determine the eligibility of the loan amount
Lowest of the following parameters:
The limit also depends on the maximum permissible deduction:
|HDBFS - Eligibility Criteria|
Loan Against Property Eligibility - FAQs
What documents should one submit when applying for a Loan Against Property?
The documents include the following:
- KYC documents for ID proof and address proof
- Income documents such as salary slips, IT returns, financial statements, bank statements, and so on.
- Property documents to determine the title
Why do banks stipulate a higher margin on Loan Against Property?
The Loan Against Property is not a housing loan where there is a creation of an asset. The Loan Against Property is a loan against an asset. The purpose of the Loan Against Property is to meet individual and business needs. Hence, the banks consider it as low-priority finance when compared to housing loans. Therefore, the margin is higher in comparison.
Why are personal loans expensive in comparison to Loan Against Property?
Personal loans are unsecured loans. Hence, they are expensive when compared to a secured loan like the Loan Against Property. However, the purpose of a personal loan and the Loan Against Property is similar.
What factors decide the eligibility for the Loan Against Property?
The following factors play a critical role:
- The income of the borrower
- The value of the property
- The EMI amount
The income of the borrower and the EMI together should satisfy the net take-home pay norms.
Will I get IT benefits if I avail Loan Against Property for home repairs?
Proving that you have taken the Loan Against Property for home repairs can be challenging. You might have to preserve the documents to rebut any notice that you could receive from the IT department. Therefore, it is better to take a loan for home repairs and renovation. The rate of interest benefit will also be available to you. At the same time, you can claim IT concessions without any problems.
Can I apply for the Loan Against Property in joint names?
Yes, you can apply for the Loan Against Property in joint names. It can help you to enhance the overall eligibility amount. However, the co-borrower should be an eligible co-applicant.
Who can be an eligible co-applicant?
The immediate family members and co-owners of the property can be eligible co-applicants.
Why should NRIs apply for the Loan Against Property along with a resident relative?
The NRI will not be available every time the bank wants to contact them. Therefore, it is advisable to have a resident relative to join as co-borrower.
Can I apply for the loan against agricultural land?
No, banks do not accept agricultural land as collateral for any loan not connected with agricultural activities. You can apply for a loan against residential or commercial property.
Can I apply for the loan against a vacant residential plot?
Yes, some banks offer loan against vacant residential plots, but the margin is higher at nearly 50%.