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Loan Against Property (LAP) Rates: All You Need to Know

Loan Against Property (LAP) is a type of secured loan in which you can use your property as collateral to secure the loan. LAP is an excellent alternative if you require a large sum of money for a longer period. LAP rates are often lower than those on unsecured loans. But, just like any other loan, LAP has some terms and conditions. Read on to discover all you need to know about LAP rates, including how they’re calculated and the factors influencing them.

Loan Against Property Rates and Charges

LAP rates vary depending on several factors, such as the borrower’s creditworthiness, the property value, the loan amount, and the lender’s rules. Here are some of the most typical LAP rates and charges to be aware of:

  • Processing Fees

For reviewing and handling your LAP application, lenders typically ask for a processing fee. If the lender denies your application, the processing fee for a LAP is not refundable. Therefore, when choosing a lender, thoroughly compare them and evaluate their fees and rates.

  • Rate of Interest

The principal loan amount and loan term will determine the interest rate for your LAP. Many lending institutions also assist you with the option of choosing either fixed or floating interest rates based on your preferences and projected income growth.

  • Legal Charges

When you apply for a LAP loan, the lender will inspect the property to ensure no outstanding legal affairs exist. It entails examining the property’s legal records and performing an on-site assessment. You will be responsible for paying the fees associated with this review through legal fees.

  • Bounce Charges

These fees range from one institution to another. It usually contains a tiny portion of the overdue. Financial institutions will only impose these bounce charges if you make your EMI payment on time owing to adequate cash or other problems.

  • Foreclosure Fees

The lender will levy foreclosure fees on the property if you repay the loan before the tenure is over. If you have chosen floating interest rates, you are also exempt from paying foreclosure fees. It also applies to part-payment charges.

  • Part-payment

It is parallel to foreclosure but with just partial prepayment of the loan balance than paying in full. In this case, the lender will charge you a fee known as the part-payment charge.

Factors that Affect LAP Interest Rate

Your credit history, income, current debt, the current interest rate on your loan against property, the value of your property, and other factors will all affect the interest rate on your loan.

Some of the factors include:

  • Property value
  • Credit score
  • Loan tenure
  • Applicant profile
  • Type of property
  • Chosen LAP interest rate

Loan Against Property Documents Required

The documents needed for LAP vary from lender to lender. Here is a list of some of the essential documents required for a LAP:

  • Identity Proof: Aadhaar Card, Passport, Driving License, Voter ID, PAN Card.
  • Address Proof: Aadhaar Card, Passport, Driving License, Voter ID, Utility bills.
  • Income Proof: Salary slips for the last 6 months, Income Tax Returns (ITR) for the last 2-3 years, and Bank Statements for the last 6 months.
  • Property Documents: Original property papers, Sale Deed, Purchase Agreement, etc.

Conclusion

LAP is among the most used loan types as it places no limitations on the borrower’s ability to use the funds. However, you must consider more than just the low LAP rates of interest when you apply for it. Remember that various expenses, like processing costs, are also charged. 

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