Loan against property, also known as LAP, is a loan facility extended to a borrower who pledges a property to the financier to get a credit amount. The loan is secured as the property is held collateral in the bank. The advance extended depends on the value of the property being kept as security. All public and private sector banks, Non-banking financial corporations, credit societies provide the loan against property. The loan can be used for various purposes like revamping the business, extending the business activities, and for personal reasons as well.
A loan against a property calculator is an advanced tool created by financial institutions for the convenience of customers. The purpose of the tool is to simplify EMI calculation for the amount to be borrowed from the lender. It helps in better planning of finances and gives an estimate to the applicant about the loan amount he/she will be availing and the equated monthly installments to be paid every month. The EMI amount presented by the calculator includes the part of both interest and the principal amount. The interest in the initial phase of the loan tenure is more and then reduces gradually.
Benefits of LAP calculator
The LAP calculators available on the website of financial institutions are a great measure of knowing the intricacies of the loan.
Some of the benefits of the calculator are listed below:
- Leads to time-saving: Just by inputting a few details, one can get to know the EMI payable for the loan amount. On the other hand, if one decides to reach out to the physical branch to know the EMI, then it might take a lot of time for bankers to tell the exact amount.
- Accurate results: The calculations executed by LAP calculators are accurate and reliable. On the other hand, if you try to do manual calculations, then it might not be exact.
- Helps in planning finances: Every business requires funds for some purpose, and if a business person is not planning on a micro level, then there are chances that he/she might land in financial trouble. To reduce such scenarios, calculators are helpful as they will provide the EMI figure before you even apply for the loan. You can get prepared for shedding out the amount required to pay the installments every month.
Factors affecting LAP calculations
The three main parameters that decide EMI calculations are discussed below:
Loan Amount: The loan amount relies on the estimation of property to be sold. Higher the credit against property sum, higher will be the EMI.
Rate of Interest: Rate of interest is the most common parameter which decides the EMI amount. Higher the ROI charged by the lender, the higher will be the installment to be paid every month. The interesting part is more in the initial years and recedes in the later segment.
Loan Tenure: The longest tenure for which the loan is available in 20 years, and it depends upon the age of the borrower. Longer the tenure, lesser will be the installment of the loan. The below table shows the EMI for a loan amount of 2 Lacs with different tenures in consideration. The rate of interest used for the calculation purpose is 8.70%.
| | 5 Years | 10 Years | 20 Years |
EMI amount to be paid | Rs. 2,061 | Rs. 1,251 | Rs. 881 |
Total amount(Interest + Principal) | Rs. 1.54 Lakh | Rs. 2.36 Lakh | Rs. 5.59 Lakh |
Interest paid back to the lender | Rs. 53,778 | Rs. 1.36 Lakh | Rs. 4.59 Lakh |
Calculation parameters of calculator
The EMI calculated is based on the following formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
EMI – Equated Monthly Instalment
P – Principal amount (the amount borrowed)
R – Applicable rate of interest (Interest as charged by the bank)
N – Loan tenure (In months)
The above formula is embedded in the calculator, and when the inputs are provided, it gives an EMI which is required to be paid by the borrower.
Documents to apply for a Loan Against Property
The documents required to process the loan against property are as follows:
- Duly-filled Application Form: The application form provided by the bank has to be duly filled and submitted to process the loan application
- Identity Proof: Identity proof of the applicant is must for the loan processing and can be any of the following, PAN card, Passport, Driving License, Aadhar Card, Voter id, Govt issued i-card
- Residential Address Proof: Can be any of the following, Passport, Driving License, Election ID card, Electricity/ Telephone/ Mobile bill/ bank statement (not more than three months old)
- Form 16: Required for checking tax records of the applicant
- Latest six months salary slip for salaried: The salary slip has to be from the current employer
- Last six months bank statement: Bank statement in which the primary account is held is required
- Last two years ITR
NOTE: No processing fees are being charged by Lendingkart before disbursement of the loan amount. Any individual claiming otherwise must not be entertained. Please report such activity on