Individuals can apply for a loan against property (LAP) to conveniently fund significant expenses, making it the most versatile form of credit. Whether it’s financing children’s education, weddings, or home renovations, this type of loan provides a flexible solution for various financial needs.

While applying for this type of loan, individuals have to pay various fees and charges associated with the process. The following content provides an overview of the fees and charges on a property loan one can expect when applying for LAP.

What are the different fees and charges on property loans?

The following are different fees and charges on a property loan that an individual has to bear while planning to avail a loan against property

• Interest rates

The interest rates for loans against property (LAP) tend to exceed those of traditional loans.  However, individuals can avail it at competitive interest rates. The interest rate will depend on their principal loan amount and loan tenor. In India, the interest rate for LAP loans ranges between 9% to 12%. Additionally, most lenders provide borrowers with the flexibility to choose between fixed and floating interest rates based on their preferences and expected income growth.

• Processing charges

Borrowers are required to pay a one-time processing fee for availing loan against property. The fee ranges from 0.5% to 2% of the total loan value, and also includes the applicable GST. Since loans against property involve a large sum of money, the borrowers must consider this fee when calculating the total cost of borrowing the loan. It is important to compare different lenders and check their processing fees for loans against property before making a decision.

• EMI bounce charges

When an individual makes an EMI payment via cheque during the loan repayment period and the cheque bounces due to insufficient funds or technical issues the lenders impose EMI bounce charges on their account. These charges are usually a small percentage of the missed EMI payment amount and may vary among lenders. 

• Foreclosure charges

When a borrower opts to close the loan before the stipulated tenor, the lender imposes foreclosure charges on the loan against a property. These charges range from 2% to 4% of the outstanding loan amount, depending on the lender. However, according to RBI guidelines, the borrower does not have to pay foreclosure charges if they opt for floating interest rates.

• Part-payment charges

Part-payment charges are similar to foreclosure charges. It involves making a partial payment towards the loan amount. In such cases, the lender imposes a fee on the borrower known as the part-payment charge, usually ranging from 1% to 2% in India. Borrowers with floating interest rates are not obligated to pay part-payment charges.

• Secure fees

Lenders charge these fees to enhance the security of the borrower’s account. Most lenders enable borrowers to manage their accounts online, allowing them to perform tasks such as making payments, reviewing transaction statements, obtaining NOCs, and more. Thus, a lender must protect the borrower’s loan account, as it contains a lot of sensitive information.

• Legal charges

After submitting the property loan application, the lender will verify the documents and conduct property verification to verify it is free from legal disputes. This process involves evaluating legal documentation and performing an on-site property assessment. Borrowers are responsible for covering the legal charges associated with this evaluation.

• Late payment fees

Late payment charges come into effect when a borrower fails to make timely mortgage payments. Lenders impose these charges as penalties, and the amount may differ from one lender to another. It is crucial for borrowers to stay informed about fees and charges on property loan to prevent encountering financial challenges.

• Loan rescheduling charges

Many lenders offer the flexibility to extend the loan tenor, reducing the monthly EMI burden through loan rescheduling. However, borrowers opting for this feature will incur a loan rescheduling charge. This rescheduling charge varies from one lender to another.

• Statement charges

The lender is responsible for sending the borrower monthly statements providing details of monthly interest and principal amounts. Lenders offer this service at a cost known as the statement charge or statement fee. Furthermore, borrowers can print their loan account statement via the lender’s online loan portal.

What are the benefits of using a loan against property EMI calculator?

Here are some important benefits of using a loan against property EMI calculator:

• Accurate – This calculator works on an algorithm eliminating the possibility of a manual error.
• Fast – It ensures quick calculations, saving borrowers from laborious manual maths.
• Free and unlimited – Individuals can calculate without paying any additional charge and can use it as many times as they want.
• Comparison – By calculating the EMI amount beforehand, individuals can compare different loan offers more effectively, selecting the most favourable option for their needs.

What are the eligibility criteria for a loan against property?

To avail a loan against property, an individual must meet the following eligibility criteria:

• An individual should have a minimum age of 25 years, except for non-financial property loans where the minimum age requirement is 18 years.
• The applicant must hold Indian citizenship.
• A borrower must maintain a CIBIL score of 750 and above.
• The individual must be either a salaried or self-employed professional.

Several financial institutions provide pre-approved offers to existing borrowers on various financial products like loans against property, and home loans, depending on their credibility. These offers speed up the loan application process. Individuals can check their pre-approved offers online by entering their name and contact details on the lender’s website.

Thus, before applying for a loan against property individuals must go through the different types of fees and charges on a property loan to ensure that the lender is not taking advantage of them. It can reduce the overall loan burden before the lender approves their application. Furthermore, the individuals must compare different lenders carefully for a smooth repayment experience.