Lenders offer secured loans through loan against property (LAP) against commercial or residential property. Compared to an unsecured business or a personal loan, these loans come at lower interest rates and have longer tenures. Since the lender will also appraise the property you are pledging, the process from application submission to disbursement of funds will take longer when compared to unsecured loans.
Whether you are self-employed in a professional setup or business or a salaried person, you can avail such loans if you own a property. The amount of money that is sanctioned as a loan is also higher than other borrowing options.
This amount will not depend upon the potential future value or past value of your property. It will depend upon the fair market value that is prevailing at the time and whether it is residential or commercial. Depending upon the nature and market value of the property, your lender could sanction an amount of up to 75% of your property’s value.
The amount of loan that will be provided to you depends upon the loan-to-value (LTV) ratio provided by the lender as well as your repayment capacity.
The loan-to-value ratio or the LTV ratio means the maximum percentage of the market value of the property that a lender may be willing to provide as a loan. LTV is determined by a lender based on the prevailing market conditions as well as their risk policy.
For example, if the lender’s maximum LTV ratio is 75% for residential property valued at INR 50 lakhs, then the owner may get at the most INR 37.5 lakhs as a loan by pledging it.
LTV ratio is calculated with the help of the following formula:
LTV ratio = (MA/APV) where
APV = Appraised Property Value
MA = Mortgage Amount (or loan amount)
LTV ratio is expressed as a percentage. The main factors that affect LTV ratios are the appraised value of a property, nature of the property, and the lender’s risk policy. You can also use the SMFG India Credit’s LTV calculator to calculate how much loan you can get.
You can take our personal loan for a variety of reasons.
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