Loan against property has undoubtedly become a popular source of financing. It is an effective and quick way for those who need huge funds to fulfil their needs. LAP serves as a valuable financial solution for borrowers seeking immediate funds for diverse purposes, including business expansion, debt consolidation, or meeting personal financial requirements
Unlike personal loans, a LAP loan is a secured form of loan and requires the borrowers to pledge an asset as collateral. Thus, it is important to understand the various types of documents required for Loan against property.
This article provides a complete checklist of all the documents that you need to avail a loan against property.
What is a Loan Against Property?
A Loan Against Property (LAP) is a mortgage loan extended to individuals, companies, or firms, leveraging their existing residential, industrial, or commercial property as collateral. The collateral provides security to the lender making it a lower-risk option for them.
Eligibility for Loan against property
The eligibility criteria required to avail Loan against property is given below:
1. Nationality of the Loan Applicant
The loan applicant must be a citizen of India and should have property within the country.
2. Age of the Loan Applicant
The age of the loan applicant must be above 24 years at the time of loan commencement and up to 70 years at the time of loan maturity.
3. Nature of Employment of the Loan Applicant
Salaried individuals, self-employed individuals, and self-employed professionals are eligible to apply for a LAP loan.
4. Credit Score
A good credit score of usually 700+ is required for a loan against property approval.
List of documents required for Loan against property
The documents requested by the lenders confirm your identity, financial status, loan purpose, details about the property served as collateral, and other relevant information.
Due to the collateral involved in the LAP, there will be more extensive paperwork requirements compared to unsecured loans.
The documents required may vary from lender to lender. However, a list of documents required for both salaried employees and self-employed individuals has been provided below:
Documents Required for Self-Employed Individual
The following documents need to be provided by a self-employed individual to avail a Loan against property:
1.Duly filled application form with passport-size photograph
2.PAN card (for both the individual and the business entity)
3.Identity Proof
- Driving License
- Passport
- Voter’s ID Card
- Aadhaar Card
4.Address proof (for Individual and the Business entity)
- Driving License
- Passport
- Voter ID
- Aadhar Card
- Utility bills
5.Property Ownership proof
- Agreement Copy
- Electricity Bill
- Share certificate (in the case of co-operative housing society)
- Municipal Tax Bill
6.Firm Constitution
- MoA/AoA (In the case of Pvt Ltd.)
- Partnership Deed (In case of partnership firm)
- GST Registration Certificate
- Form 32 for information about the latest directors
- UDYAM certificate
7.Income proof
- Audited financials (Last 3 years)
- Tax Audit Report (Last 2-3 years)
- GST form 3B (last year)
- ITR, Computation of Income, profit & loss account statement, and Balance sheet (Last 2 years)
8.Banking
- Bank statements of your business accounts (Last year)
9.Signature proof
- Passport
- Bank’s verification
- PAN card
Other documents
Shareholding pattern and the list of directors/partners (in the case of companies/partnership firms)
Sanction letters of existing loans (if any) along with corresponding EMI details
Documents for Salaried Individual
The following documents need to be provided by a self-employed individual to avail a Loan against property:
1.Duly filled application form with passport-size photograph
2.PAN Card
3.Identity Proof
- Driving License
- Passport
- Voter’s ID Card
- Aadhaar Card
- Employee ID
4.Address proof
- Driving License
- Passport
- Voter’s ID Card
- Aadhar Card
- Utility bills
5.Ownership proof
- Agreement Copy
- Electricity Bill
- Share certificate (in the case of co-operative housing society)
- Municipal Tax Bill
6.Income proof
- Salary slips (Latest 6 months)
- Form-16 (Last 3 years) or employment proof
7.Banking
- Bank statements reflecting the salary credits (Last 6 months)
8.Signature proof
- Passport
- Banker’s verification
- PAN card
Types of property that can be mortgaged in a loan against property
At the discretion of the bank, the following types of property that can be mortgaged in a loan against property
Residential property
Residential property is real estate intended for personal living or housing. Applicants can provide a vacant, rented, or self-occupied property as collateral.
Commercial property
Commercial properties are structures and spaces designed for income-generating business activities. You can pledge a rented, vacant, or self-occupied commercial property as collateral.
Industrial property
Industrial properties are utilised for manufacturing or production of goods. Borrowers have the option to offer an industrial property as collateral for a mortgage loan.
Conclusion: Way forward
Loan against property can be very beneficial for small businesses in the MSME sector since the interest rates offered on such loans are usually lower than that of unsecured business loans. However, one must check the fees and charges associated with LAP before they apply for a loan against property to accurately gauge the costs associated with borrowing.
You May Also read this:
- Maximizing Tax Benefits on Loan Against Property: A Complete Guide
- What are Fees and charges on Loan against property
- Top 6 Advantages of Loan Against Property in India
Frequently Asked Questions
What is the maximum amount of loan sanctioned on property value that can be availed for a loan against property?
The maximum loan amount that can be availed in case of a loan against property depends upon the current property’s market value, the nature of the property, and the policies of the lender. For example, a residential property may allow the borrower to get a loan of a higher amount when compared with a commercial or industrial property.
What property documents required for Loan against property?
To obtain a Loan against property, you need to submit various property documents which include an Agreement Copy, Electricity Bill, Maintenance Bill, and Municipal tax bill among other documents as required by the lender.
What is the maximum age limit for a self-employed professional to acquire a loan against property?
The maximum age limit for a self-employed professional to acquire a loan against property is 70 years at the time of the end of the loan tenure.
What is the maximum loan amount that a borrower can get against a property?
The maximum amount that can be availed in a Loan against property depends on the market value of the property.
What is the LTV ratio in case of a loan against property?
The Loan-to-Value (LTV) ratio in the case of a loan against property is up to 75% of the property’s market value.
Is it possible to avail a Loan Against Property in case of a jointly owned property?
Yes, it is possible to avail a Loan against property in case of a jointly owned property. However, all the joint owners must be taken into confidence before taking a loan against property.
