Loan against property or LAP is one of the risk-free ways of raising fund to spend on your money-calling property. In case of corporate needs, for education expense of children, or any other unforeseen expenditure, loan against property is a method of getting access to the assets value without any loss of ownership. But like all other fund instrument, loan against property also has certain document requirements for which you have to comply. Having such prior knowledge of document requirements in hand, application will be easy, approved at the correct time, and get cash advance.
In case, you need loan against property, this article will guide you step by step procedure of documents required to make maximum loan application fruitful.
What is a Loan Against Property
We will later cover loan against property and documentation points in detail. Loan against property is a secured loan where residential, commercial, or industrial property is accepted as collateral security. Based on the value of security property, finance institutions release money to borrowers and are obligated to refund with interest within the borrowing period of tenure. The loan provides comparative rate of interest, comfortable repayment period, and large sum borrowed against collateral. A property against loan option is thus considered one of the most effective ways to raise large funds.
Why Documents Have Special Status in Property Against Loan?
In loan against property, your documents are brought in front of the lenders to determine your credit worth, repayment ability, and market value of the property. Your documents introduce them your credit history, money history, legal title to collateral property, etc. Inadequate or tardy information will lead to delay, rejection, or unfavorable terms of the loan. It is thus always best to prepare all the documents in advance before applying for a loan to quicken your loan application process.
Principal Documents for Loan Against Property
The particular list of documents to be submitted may differ slightly depending on the lender, whether salaried or self-employed borrower, and type of property being mortgaged. Nevertheless, a full list of documents for loan against property required while availing a loan against property is as follows:
1. Proof of Identity
The lenders verify your identity by making government-approved identity documents compulsory. The identity proof documents are accepted:
- Aadhaar Card
- PAN Card
- Voter ID
- Passport
- Driving License
Check the spelling of the name and balance of information on all the documents so that no error is committed.
2. Address Proof
They also request original residence proof of your address for communication and verification of the information. Following documents as residence proof are usually accepted:
- Aadhaar Card
- Bills such as electricity or water bill payment receipt (within three months’ date)
- Passport
- Receipt of rent (if rented property)
- Receipt of property tax
If your residence address as per your proof of identity and your present residence address do not match, then submit other address proof.
3. Income Proof
Income proof needs to be submitted for the purpose of your repayment capacity assessment. Income documents to be submitted from income differ based on whether the borrower is salaried or self-employed:
For Salaried
- Three to six month salary vouchers
- Two years Form 16 or ITR
- Six months salary credit bank statements
For Self-Employed
- Firm’s profit and loss account
- Firm’s balance sheet, certified by chartered accountant firm
- Firm’s two or three years ITR
- Periodic cash receipts continuously business as well as personal use bank statements
Normal income not only assists in the situation of loan application but actually proves useful while negotiatons like interest rates.
4. Title Ownership Documents
As the loan is being collateralized, it will be proper to provide full documents of title of ownership of property. They are:
- Title deed or sale deed of property
- Encumbrance certificate (stating the property as debt-free, lien-free, and clear of legal suits)
- Paid receipts of property tax documents
- Approved plan and approved building plan
- Possession certificate (wherever necessary)
Banks check that the house belongs to you, its market value, and admissible legally for it to serve as collateral.
5. Proof of Business or Employment
Your business or employment details determine your lenders about your repayment ability. These are what your lenders prefer:
For Companies
- Business license, partnership deed if any, or Articles of Association if GST registered
For Employees
- Your appointment letter of your company, offer letter, and/or employment letter
All these documents guarantee your lenders of your repayment from a constant source of income.
6. Photographs
You will be required to submit passport-sized photographs of yours for facilitation of general documentation process as per lender’s requirement.
7. Loan Application Form
All the lenders would also be required to include a loan application form for the proper filling and in full. The application form would be requested to furnish columns for repayment amount, repayment period, and personal information.
8. Credit Report
Though every lender will have varying policies towards your credit report and history, it can’t hurt to bring a copy of your most recent credit report with you. The ideal 700+ credit score will speak well for your approval and terms on the loan.
9. Co-Applicant Documents (if applicable)
If you are a co-borrower (wife, sister or brother, etc.), your co-borrower will have to produce the same documents in order to establish ownership, income, and identity. Your co-borrower may also increase the loan tenure.
Important Points to Remember
1. Character of Property Is Important
Residencia, industria, or comercio property is being mortgaged and loan against property assumption. Documents submitted to character of property being mortgaged.
2. Originals
Keep originals for verification and self-attested photocopies.
3. Bank-Specific Requirements
There can also be some other documentation requirements of other banks and institutions. Follow the lender’s instructions very carefully while preparing the submission.
4. Additional Documents
Based on some requirement and preference, the lender may have some other documents like a joint holders’ letter of authority (in the case of joint holding) or photostated legal wills.
Property purchase process on loan can be made easy to a great extent if all the documents are pre-prepared. Identification proof, residence proof, income proof, proof of property ownership, and credit report must be prepared beforehand so that the approval process can be done at a faster rate. Employment proof or co-applicant information are some of the documents that can make you eligible to a greater extent.
A property loan is certainly one of the sources of working capital to earn money for long or short needs. But keeping your papers in place and up to date will save your time, avoid the hassles, and make you tension-free.
So don’t simply sit idle if you are firm to utilize the loan against property. Prepare your documents, set everything in order, and approach your lender office confidently and grab your actual value of your property.
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