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How Does Loan Against Property Work?

If you are in the finance market sector or in real estate, you may hear about loan against property pretty much every day. But for the rest of the people, they may not have heard about this term. However, they do know about Mortgages, which is the same thing, or at least similar. Loan against property is a loan in which the security is a property that you own. This can be a commercial property or a residential property. It can be a property that you own yourself,  or belongs to your spouse, etc. 

Loan against property is therefore a secured loan since there is collateral or a security. But this is why there is a big benefit for you!

The rate of interest is lower in case of secured loans when compared to unsecured loans. And so, when you do take a loan against property, you pay less interest. For these loans, the rate of interest starts from 8.5%. How much money you’ll get for the loan depends on your property’s market value. Also understand that you’ll not get 100% full value of your property. 

Various types of loan against property

They are:

  • Self-owned residential property

  • Self-owned and self-occupied residential property

  • Self-owned but rented residential property

  • Self-owned piece of land

  • Self-owned commercial property

  • Self-owned but rented commercial property

Loan against property interest rates as given by the major lenders

Here is listed the inter rates for loan against property from the top financial lenders in 2021:

Lender’s Name

Interest Rate

Loan Amount

Tenure

Capital First

As per the terms and conditions set by

Rs.5 lakh – Rs.10 crore

Up to 20 years

HDFC Bank

9.90% - 12.40% p.a.

As per the terms and conditions of HDFC Bank

Up to 15 years

Bajaj Finserv

  • 10.10% - 11.50% p.a. (For salaried individuals)

  • 10.50% to 14.50% p.a. (For self-employed individuals)

Up to Rs.3.5 crore

2 – 20 years

ICICI Bank

9.80% - 11.90% p.a.

Up to Rs.5 crore

Up to 15 years

State Bank of India

9.90% - 11.45% p.a.

Up to 7.5 crore

5-15 years

So there you have it! Here are the interest rates of the loan against property from the top lenders in India for 2021.

Now that you know about it, here is what you need to know before getting this type of loan. Here’s the things you need to keep in mind.

  1. Check your eligibility: The very first thing that you need to know is where you are eligible for the offer at all. So here’s what you can do. Note down the details of all offers from all lenders. No need to eliminate lenders and offers right now. Just get as much information as you can, but only if you fit the bill. That means note the offers down only if you are eligible for them. Most lenders have Eligibility Criteria on their website. 

  2. Calculate your EMI: On the lenders’ websites, you can also see the loan amount, the time given for repayment and the EMIs and interest rates. Can you manage to give the EMIs for a set term? If yes, shortlist those offers and lenders. Calculate how much EMIs you’ll need to pay each month for the set period. Lenders calculate and give you this information beforehand for your benefit.

  3. Get all the property records and documents together: This is important. You need to have all the property documents and certificates in one place. Organize them for when you’ll need them while applying for the loan against property. Documents you’ll need include lease deed, sales deed and registration certificate. The House Tax Return and the Approved Building Plan needs to be attested by the Municipal Corporation.

  4. Shortlist lenders: Now that you have a good idea of the offers, lenders and what you can afford to repay, it is time to think about the additional beneficial offers. Based on this, do a final shortlist.

Here are the documents which you’ll need to furnish:

  • KYC i.e. age and address proof.

  • Income documents

  • Ownership documents of property.

  • Bank statements for the previous six months.

  • A cheque for the processing fee.

  • Others documents that may differ for each FI.

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