A Loan Against Property (LAP) is a secured loan where you use your property (usually residential or commercial) as collateral to obtain funds from a lender. The processing of a Loan Against Property involves several steps, from application to disbursement. Here's how the process typically works:
Step 1: Application
Submission of Application: You start by applying for the LAP with a chosen lender. You can typically apply online through the lender's website or visit a physical branch. The application form will require personal, financial, and property-related information.
Step 2: Document Submission
Document Verification: Once your application is submitted, the lender will require you to provide a list of documents, including property-related documents, identity proof, address proof, income proof, and bank statements.
Step 3: Property Valuation
Property Assessment: The lender will appoint a valuer to assess the market value of the property you're using as collateral. The valuer will consider factors like location, size, condition, and market trends to determine the property's value. The loan amount you're eligible for will be a percentage of the property's assessed value.
Step 4: Credit Check
Credit Verification: The lender will conduct a credit check to assess your creditworthiness. They will review your credit history, credit score, and financial stability. A good credit score can improve your chances of loan approval and better terms.
Step 5: Loan Approval
Loan Approval: If your application meets the lender's eligibility criteria, the loan is approved. The lender will communicate the terms of the loan, including the interest rate, loan tenure, and repayment schedule.
Step 6: Documentation
Signing of Agreement: You will be required to sign a loan agreement that outlines the terms and conditions of the LAP, including the interest rate, repayment schedule, and consequences of default.
Step 7: Property Documentation
Property-Related Documentation: You need to provide the original property documents, including the title deed and ownership proof, to the lender. These documents will serve as collateral for the loan.
Step 8: Loan Disbursement
Funds Transfer: Once all the documentation is in place and verified, the lender will disburse the loan amount. The funds are typically transferred to your bank account or provided as a demand draft, depending on your preference.
Step 9: Repayment
EMI Payments: After receiving the funds, you are required to start repaying the loan as per the agreed-upon repayment schedule. LAPs usually have monthly EMIs (Equated Monthly Installments), and you must make these payments on time to avoid penalties.
Step 10: Loan Closure
Loan Closure: Once you've repaid the entire loan amount along with interest and any applicable charges, the lender will release the property documents back to you. This signifies the closure of the loan, and the property is no longer held as collateral.
It's crucial to remember that a Loan Against Property is a significant financial commitment, and failing to repay it can result in the lender taking possession of the property to recover the outstanding amount. Therefore, it's essential to assess your financial capability, choose a loan amount, and tenure that you can comfortably manage, and make timely repayments to protect your property and creditworthiness.