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Loan against property versus loan against securities

There are many differences and similarities between Loan Against Property and Loan Against Security.

Pooja Gawde

22 Dec 2008

loan against property (LAP)

loan against security (LAS)

 

 

Instrument mortgaged: property; commercial or residential.

Instrument mortgaged: mutual funds, National Savings Certificate, Kisan Vikas Patra or LIC policy or fixed deposits and jewellery.

 

Processing fee: Around 1 per cent.

Processing fee: Minimum 0.25 per cent.

Margin required: Around 15-20 per cent.

Margin required: Around 15-20 per cent of the value of the instrument.

Salaried employees / professionals as well as self-employed and other income tax assesses for last 3 years with a minimum gross annual income of Rs. 60000 are eligible for the loan. Salaried individuals can get up to 36 times of net monthly income as a loan. Others can avail up to 3.5 times the net annual income (average of last 3 years) as a loan.

Possession of the instrument to be mortgaged justifying the value of the loan applied for.

loan tenure: Up to 15 years

loan tenure: Repayment within the maturity period of the instrument mortgaged for the loan. You can get loan against gold jewellery which needs to be repaid at the end of a fixed loan tenure which is pre-determined. For instance, State Bank of Travancore offers gold loans for 6-12 months. The tenure can be extended based on the customer's request and the banks decision regarding the same.

Documents required:

 

Salaried

  • Income proof (Form 16 along with salary certificate from the employer).

Professional / self-employed

  • Income Tax returns for past 3 years.
  • Latest income tax assessment order (for overdraft amount of over Rs. 5 lakh).
  • Income certificate from appropriate revenue authority like Tehsilldar/BDO/SDO (for agriculturist)
  • Original title deeds of the property offered for mortgage
  • Paid receipt of latest maintenance, water tax, municipal tax and any such taxes.
  • Non encumbrance letter from co-op society.
  •  Permission to create Equitable Mortgage from society.
  • Permission to create equitable mortgage from society.
  • Last 6 months bank statements of main bank account.

 

Documents required:

 

  • Passport size photograph
  • Proof of Identity PAN Card/ Voters ID/ Passport/ Driving     License
  • Proof of Residence Recent Telephone Bill/ Electricity Bill/ Property tax receipt/ Passport/ Voters ID
  • Statement of Bank Account/ Pass Book for last 6 months
  • Original form of the instrument to be mortgaged.

 

 

Maximum loan amount: Up to 40-60 per cent of the value of property as a loan against property.

Maximum loan amount: In most cases, up to 50-80 per cent of the value of the security mortgaged (if the security gives  fixed returns)

If it gives variable returns, s, the maximum loan amount is 40-60 per cent of the value of the security.

Note: The loan amount is based on the type of the instrument to be mortgaged.  In case of loan against jewelry, it depends on the valuation.

Interest rates: 13-17 per cent.

Interest rates: 12-15 per cent.

Overdraft facility available.

Overdraft facility available.