Why Is Security For The Loan Important In LAP?

Loan against property is a form of secured loan where your home is put as collateral. Typically, the interest rate of this type of loan is lower as opposed to unsecured loans because there is less risk on the part of the lenders. 

LAP, as these loans are popularly known, are home equity loans that are financed by the public, private banks, and some housing finance companies. Generally, banks offer loans up to 60% on the market value of the property. 

But the final amount of loan depends on the policy of the lender. When you apply for a mortgage loan against property, here are the steps taken as a security measure. 

Your property is the collateral

One of the most defining features of the loan is that the property is used as collateral for the loan. You have to be the owner of the property you are using as collateral. If the property is co-owned, then all owners have to be co-applicants of the loan. If you are unable to pay off your EMIs, then you can forfeit the property to the lender. Hence it is an important security measure taken by the lending institution. 

In comparison to other loans, this loan has a lower interest rate as compared to other loans. You can research for PNB Housing Finance mortgage loan interest rate or the interest rate from other lenders to make a choice. The interest is levied on the principal amount, and the amount to be paid back is divided into equated monthly instalment for the whole tenure.

Documents Prove Ownership

Salaried individuals, as well as self-employed people, are eligible to acquire LAP after they prove ownership. It is an important security measure. These measures include address proof, identity proof, income tax return of three years, and salary slip of six months (salaried class) or balance sheet or P&L statement for the last two years (self-employed people).

Along with these primary documents, the following are some other documents that you need to present concerning your property –

• Completion certification 
• Registration deed 
• Latest receipt of property tax payment 
• Valuation certificate 
• Building approval plan 
• Occupancy certificate 

Eligibility for the loan is another security measure

There are many eligibility criteria, apart from the ownership of the property. These include age, credit score, and more. Every lender will have their specific criteria you need to meet. If you miss out on meeting even one criterion, the chances of loan rejection are high. Check for the eligibility criteria before applying for a loan.

The processing time of a loan against property generally takes more time than other types of loans. It is because the lenders carry out an extensive process of examining the property and related documents. The property is evaluated to determine the current market worth. The scrutinizing process is a security measure that makes the processing time longer. 

When buying a loan against property, ensure that you compare different options and compare the offerings before making the final decision.