Synopsis: When armed with a solid credit history and repayment capacity, it makes sense to opt for a Loan against Residential Property amongst all secured loan options. In today’s article, we explain what a loan against residential property is and the procedure for applying for it. 

Whether setting up a business, purchasing new machinery, paying for higher education, or meeting unforeseen medical expenses, a common thread connecting all these instances is the requirement of a considerable sum of money–a requirement that can be met through loans.

While today, there are myriad credit options available to individuals and businesses alike for raising funds, nothing tops getting a Loan Against Residential Property. Their secured nature with no end-use restriction at low-interest rates makes Loan Against Residential Property an excellent secured loan choice. 

But what is a loan against residential property, and why should you prefer it over other credit alternatives? Let’s find out. 

What is a Loan Against Residential Property? 

For the uninitiated, a loan against property (LAP) is a secured loan issued by lending institutions against a pledged property. Borrowers can either mortgage their residential property or commercial property to avail of a loan against property.

Hence, a loan against residential property is a loan secured against fully-constructed individual houses, apartments, or flats. Such residential properties can either be self-occupied or rented out. Additionally, their title needs to be clear, i.e., the residential property should not be subject to any litigation.

Features of Loan Against Residential Property

Some of the main features of a loan against residential property are as follows:

1. LTV Ratio

The loan disbursal amount is largely based on the property’s current market value, also called the Loan to Value (LTV) ratio. Typically, this proportion falls between 75% and 90% for a loan against residential property. The final quantum will also take your income level and credit history into account.

2. Interest Rates

Since a loan against residential property is backed by a clearly-titled, fully-constructed residential property, borrowers can get a huge lump sum at very low-interest rates.

3. Long Tenure

A loan against residential property can usually extend to 30 years, which is in huge contrast to only 10 years offered for a loan against property backed by a commercial estate.

8 Reasons That Make a Loan Against Residential Property a Good Idea 

The very concept that you can avail of a huge loan at low-interest rates while continuing to own and use your property shows that a loan against residential property is an excellent credit choice. We enumerate various other benefits of a LAP secured against residential property below. 

1. No End-Use Restriction 

Unlike business loans, the amount extended against a residential property can be employed for meeting all business purposes, including scaling of business, working capital investmentdebt consolidation, home remodeling, and personal, medical, or education expenses. 

2. Easier Approval Process

Since the LAP is already secured by collateral, the risk for lenders is meaningfully reduced. As a result, the documentation requirements and approval processes are relatively simple as they only need to verify the veracity of the title and property’s current market value. 

3. Lower Charges 

Unlike unsecured loans, a loan against residential property is generally processed with nominal charges approximating Rs. 10,000. However, some lenders can even forego these charges if they are confident about the borrower’s profile. 

4. Simpler Technical Appraisals

In contrast to commercial properties, residential properties usually face relatively simpler appraisal terms due to no requirement of getting state approvals for running a business. However, lenders may be interested in judging a property’s residual value while determining the loan sanction amount.

5. Maximum Tenure 

A loan against residential property can be availed for a tenure lasting almost 30 years, subject to the borrower’s age and risk profile. Nevertheless, borrowers must take note that while a long tenure results in lower monthly EMI payments, the cumulative interest payments could amount to a significant sum. 

6. Higher LTV

Out of all the secured loan options, a loan against residential property offers the highest loan amount of up to 90% of the market value. This becomes significant when the said residential property demands a high premium value.

7. Continued Property Use 

Even though the property rights are transferred to the lender during the duration of the LAP, borrowers can continue to possess and use the pledged property. 

8. Lower Interest Rates

Finally, a loan against residential property can be secured at low rates of interest, even lower than LAPs backed by commercial properties. This is because the lender is already secured by the collateral and is unconcerned about the viability of a commercial estate.

Now that you are aware of the several benefits of getting a loan against residential property, how can you apply for it?

Steps to Apply for a Loan Against Residential Property

The process for applying for a loan against residential property would differ per the lender. 

  • First and foremost, you must compare several lenders on their loan conditions and eligibility criteria.
  • Secondly, you need to confirm that you meet their eligibility criteria for a loan sanction. Generally, lenders demand a solid credit history—a CIBIL score of 750+ along with a strong financial position for extending a LAP. 
  • Next, keep your documents ready. Mostly, lenders demand identity and address proofs, such as PAN cards and Aadhaar cards, along with income proof in the form of bank statements, and ITR/GST returns. Additionally, borrowers will need to submit the property’s title deed or a certificate of occupancy.
  • Voilà, you are ready to apply for a loan. Simply head over to the lender’s application page or meet their customer representative.

Apply for a Loan Against Residential Property at Protium  

Without a doubt, unlocking your residential property’s value is the way to go when looking for a secured loan. But not everyone has the thick credit profile that banks and NBFCs desire for extending LAPs.

Despair not if you find yourself in the same boat. Instead, apply for a loan against residential property at Protium. Not only do we offer loans against property at attractive interest rates that you can pay back at flexible terms, but we also help you build your credit history from the ground up. 

Apply for a loan against property at Protium today, or give us a holler at 8828827800 to get in touch with a representative!