moneyRaksha

Documents Required For A Loan Against Property

A loan against property (LAP) is a loan that is taken by pledging the borrower’s existing property as collateral. This can be an efficient way of raising money, especially when other options prove to be futile.

In order to be able to procure a loan against property, the borrower should own an asset like a property (residential or commercial) with clear, marketable title.

The documents required for a loan against property are:

1. Proof of Income- Even though the borrower is pledging his home as security, proof of income is vital for a loan against property. The borrower’s income provides assurance to the lender that he will be able to pay his EMIs on time. Revenues achieved by selling the collateral provided to the lender is considered a last resort in the case of default of the loan, as a home is not easily converted into cash and so is a relatively illiquid asset. In the case of a salaried borrower, the lender requires the borrower’s salary slips for the last 3 months. For the self-employed borrower, additional documents depicting the company’s P&L accounts and balance sheets for the last 3 years are required.
2. Income tax returns- the borrower’s Form 16 and tax returns for the last 3 years.
3. Bank account statements for the last 6 months- the lender needs these to observe the borrower’s financial transactions which would probably shed some light on his revenues and the nature of expenses.
4. ID & age proof with 5 passport size photos- this includes proof of the borrower’s current residential address and age proof in the form of a birth certificate, passport, ration card, etc.
5. Fee towards processing of the loan against property.
6. All documents relating to the property being pledged as security including its valuation and surveyor’s reports prepared by an expert recognised by the lender.