Loan Against Property – The Process

Loan against property is one of those all-purpose loans whose borrowings can be used as per the discretion of the borrower. There is no obligation attached to a specific use of borrowed funds, which makes them a preferred choice among people who are looking for a high loan amount and have a property to submit as collateral. However, after applying for the loan against property, many of you have no idea as to what happens behind the scenes and how your application is processed. To shed light on this area, below are the steps by step process of the LAP: 

  1. Documents: The first thing that the banks require along with your application or just after your loan application is the necessary documents. Also, your signature is mandatory on the application form and on all documents that you submit, and keep in mind that your signature on the form and documents should be an exact match. 
  2. After you submit the documents and the application form, the bank will verify the details and forward it internally for further processing. 
  3. Personal Meeting: The next step is that you will be called to the bank for a face to face discussion with the loan officer. You can use this meeting to clear your doubts regarding loan processing. 
  4. Credit Check: Your credit history, along with your credit score, will be checked by the bank to verify the complete information of ongoing and past credits. Another objective behind the check is to know your credit repayment track record. The information gathered from this check contributes greatly in deciding whether your application gets processed for further processing or not. 
  5. Valuation of Property: After your application gets cleared from the credit check, the next vital step is the legal valuation of the property. Each bank has their team of legal experts and field officers who will cross verify each property documents and also visit the property site to determine its age, and assess whether any legal violations are done or not in the construction of the concerned property. 
  6. Based on their assessment, the team will determine a value for the property based on which your eligibility for the loan amount will be determined. You need to keep in mind that in case of loan against property, the maximum loan advanced is limited to 70% of the property’s value. 
  7. Approval or Rejection: After the valuation is done of your property, your eligibility for the loan amount will be assessed, based on which the decision will be taken whether to approve your loan or reject it. The decision is solely on the discretion of the lender. However, as long as the documentation and field verification ends up positively, there shouldn’t be much of a problem. 
  8. However, your application can also be rejected based on any slightest of the discrepancy found without any further ado. 
  9. Agreement: After the acceptance of your loan, a loan agreement is sent to you for signature. Read the agreement carefully, and know the different terms and conditions. You must know what you are signing for before you sign the document. 
  10. Loan Disbursal: Once both the parties sign the loan agreement, the loan amount is disbursed. However, the bank may also ask for a few post-dated cheques of the EMI amount in case the electronic transfer does not work. After this step, the loan amount is transferred to you. 

Now that you are aware of the process of loan against property, make sure that you take the necessary precaution and exercise due diligence as and when required. 


One of the prime reasons for the increasing popularity of loan against property is that as a personal loan; there is no obligation for the end-use of borrowed funds. You can use the funds borrowed as a loan against property for any purpose whatsoever. However, this does not mean you avail the loan just for the sake of it. Since it is a debt, the decisions regarding it should be taken based on in-depth research and all relevant information. Below is the step by step process of loan against property to help you get more accustomed with this loan type:

  1. Along with your application form, make you submit all the required documents to the bank, and they are all signed. Your signature on the form and documents should be an exact match.
  2. The next step is a personal discussion with the loan officer. Use this meeting to clarify all your doubts. 
  3. The bank will now evaluate your credit history and assess your credit repayment track record. 
  4. After you pass the credit evaluation, the next crucial step is the property valuation. Based on various aspects, they will determine the value of the property.
  5. Next, your loan will be accepted or rejected based on the property value and your eligibility. 
  6. After the approval of your loan, you need to sign a loan agreement. Make sure to read it carefully before signing.
  7. The loan amount is disbursed after taking a few post-dated EMI cheques from you.