How is a Loan Against Property Processed?

A loan against property is a secured loan type that can be availed for any purpose and there are no end-usage restrictions on the loan amount. LAP shares the same features and functionality as that of a personal loan, however, it has 3 major differences, first, you can avail of a higher-value loan amount; second, you will need to pledge a residential or a commercial property that you own as collateral; and finally, the loan tenure is longer. 

For a SMFG India Credit loan against Property, the borrower needs to pledge non-movable property, either residential or commercial property as collateral. This property must be owned by the applicant, and must not already be pledged as collateral for any other loan. It must also be free of any legal disputes.

Compared to a personal loan, the LAP process is a bit different as the lender needs to perform additional checks and verification before approving the loan. The following are the steps involved in the processing of property loans.

Must Read: 5 Factors To Consider Before Applying For a Loan Against Property

Complete Loan Against Property Application Process:

Before proceeding to apply for a LAP, knowing the steps involved is very important to make the process smooth and easier for you.

• Fill Out the Application Form
  The very first step to the LAP process is to start filling out the application form with your personal details, loan amount, income details, tax status, property details, employment status, and all other columns. Make sure to fill in the application form correctly without any errors. A small error or misrepresentation of information can lead to the rejection of the LAP application. 
• Confirm the Details
  Once applied for LAP, a representative from the lender will contact you to verify your personal details, residential address, and do the initial property verification. Following confirming the details, the lender will move to the next step. 
  This is a preliminary check to ascertain your initial loan against property eligibility. Further checks and verifications will be done by the lender before approving the LAP.
• Submit Necessary Documents
  This is the most crucial step in the LAP approval process. You need to submit all the necessary loan against property documents including all the KYC documents, income proof, address proof, ITR, bank statements, property documents, and other documents for your LAP application as per the lender’s policy. 
  Make sure to provide all the latest documents and the property should be free from any kind of litigation. 
• Verification of Documents
  Once all the documents are submitted, the lender will conduct an advanced background verification check including verifying employment status, income status, credit report, and other personal records. During the process, the lender may call for a one-on-one meeting to understand your requirement and financial position. Although there is no end-usage restriction on the loan amount, the checks are done to ensure the loan amount will be repaid timely.
  Also, the lender will carry out the evaluation of the property as well as its documents and ascertain the authenticity of the documents, market valuation and other aspects of the property. By calculating the market value of the property as well as your eligibility, the lender ascertains the final loan-to-value (LTV) ratio of the property that can be offered to you. Please note that the LTV offered by different lenders may vary as per their policies.
• Approval of LAP Application
  After successfully completing the verification process, the lender will get in touch with the borrower to discuss the property loan interest rate they can offer and other terms and conditions of the loan.
  Upon your signed acceptance of the terms in the loan agreement, the lender will provide the final loan approval and proceed to the final step of disbursal. 
  Because of the extensive verification process involved, it can take up to 15 to 30 days to receive the funds.

Things to Do Before Applying for LAP

Applying for a loan against property is a big financial decision, as it involves both locking up your income for a significant period to service the loan and putting your asset as collateral. Here are some steps one may follow before applying for a loan against property:

• Conduct thorough Research: Before applying for a LAP, compare the applicable interest rate, do research on lenders, check online reviews by borrowers, and know about the different types of charges like processing fees, service charges, foreclosure charges, etc. It will help you to get the best deal on LAP.
• Know the Market Value of the Property: The maximum loan amount in LAP is dependent on the market value of the property. Lenders may approve a maximum of upto a certain percentage of the property value as loan amount, known as the loan to value ratio. However, the final loan amount offered will also depend on other factors, including the borrower’s eligibility. You can use our free LTV Calculator to get an estimate of the maximum amount you may be able to get. Applying within this range increases the chances of loan approval and getting a competitive interest rate on the loan.
• Check the Eligibility Criteria: The eligibility criteria for LAP differs for every lender. You need to check the eligibility criteria minutely and apply only if you can fulfill most of them.
• Documentation: Check the required documents for a LAP and ensure that you have these available with you before applying
• Plan your Loan: Use an LAP EMI calculator to get an estimate of your monthly outflow. Select a tenure so that the resulting EMI fits within your budget comfortably.

Must Read: How to Get Tax Benefits on Loan against Property

Conclusion

The loan against property is suitable for meeting any type of financing requirement, whether it is related to business or meeting any personal funding requirement. The application process is simple and straightforward. Since the loan amount is pledged against the property, the interest rates are lower compared to a personal loan and one enjoys flexible repayment tenures between 12 to 180 months. 

If you have any queries or doubt regarding the application process, you can raise the issue directly with the lender before applying for LAP.