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All You Need to Know About Loan against Property Overdraft Facility
Real Estate

All You Need to Know About Loan against Property Overdraft Facility 

Taking a loan against your property with an overdraft facility can prove to be helpful in situations that demand quick funding. It is a service offered by lenders that allow you to get short-term funds against your asset. Being a home loan borrower, you are already in a financial constraint; however, unexpected financial situations can make things even worse. This is where LAP-OD proves to be highly helpful.

How Does Loan Against Property-Overdraft Work?

LAP-OD is a type of financial service offered by lenders to help borrowers raise funds against a particular property. In simple terms, it is a form of short-term loan where the person’s property is kept as collateral. It can be either residential property or commercial property. The financial lenders will hire an impaneled valuator to execute a legal as well as technical valuation of the property. Post that, the lender decides to finance any portion of the proper based on its market value.

For example, if the market value of the property stands at 1 crore INR and the lender decides to fund up to 50% of the market value, then you can acquire a loan amount of 50 lakhs INR. However, you would not get this amount immediately. The lender will be opening an overdraft account with a limit of 50 lakh INR or the approved loan amount. You can then withdraw the amount as and when you require it. Moreover, you will be liable to pay interest, which is equal to EMIs or monthly payments.

What is the Eligibility Criteria for This Kind of Loan?

The main criterion to acquire loan against property is the market value of your asset. Along with that, the following are the key considerations –

  • Your repayment capacity
  • Business stability
  • Income
  • Experience
  • Credit history
  • Age
  • Liabilities
  • Number of assets

Each financial lender has its own loan against the property calculator, where they check the eligibility of the applicant. The above information is filled in the software, and it will automatically display the eligibility. You can also use the loan against the property calculator to check how much money you can avail as a loan against property.

What is the framework of this loan?

Target Client and FOIR

Self-employed professionals, as well as salaried ones, are both eligible to obtain this type of loan.  Moreover, the optimum fixed-obligation-to-income-rate and loan-to-value ratio are typically set at 70.

Tenure and Interest

The rate of interest on this type of loan stands between 12% and 14.50%. Loan against property with overdraft facility is typically offered for a maximum period of 24-months. The borrower may renew the cap at different intervals based on the discretion of the lender. The borrower has to justify his need to increase the demand and must adhere to the relevant norms of the lender.

Co-Applicant

You need one co-applicant to avail of LAP-OD. All the property owners should compulsorily join the loan application.

Minimum Property Area

In order to acquire loans, the minimum area of the residential property should be 300sq.ft, whereas, for commercial property, the area should stand around 250sq.ft.

Credit Summation

Often lenders make it mandatory for the borrowers to route their revenue through the LAP-OD account.

Exit Criteria

A financial lender holds the right to reduce the limit in case it finds unsatisfactory behavior on the part of the borrower. For instance, default over a period of 90 days will be deemed as a non-performing asset.

Final Thoughts

Raising loans against property with an overdraft facility can be a great financial assistance. And above are some vital points regarding the same that will help you make a well-informed and right decision.

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