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A Complete Guide of Loan Against Property Glossary & Terminology

A Complete Guide of Loan Against Property Glossary & Terminology

Jan 04, 2024 By LOANMANI.COM 55 Views Category: Financial Insights

A loan against property (LAP) is a type of secured loan where a borrower pledges their property as collateral to get a loan from a financial institution. 

As with any financial product, there are many technical terms and jargon that can be confusing for borrowers. 

This guide provides a complete glossary of the most commonly used terms and terminology in the LAP market. 

Here is a complete guide to the loan against property glossary and terminology:

  • Collateral: The property that a borrower pledges to the financial institution as security for a loan.
  • Lender: The financial institution that provides the loan against property.
  • Borrower: The individual or entity that receives the loan against property.
  • Mortgage: The legal agreement between the borrower and lender, which gives the lender the right to take possession of the pledged property if the borrower defaults on the loan.
  • Principal: The amount of money borrowed by the borrower.
  • Interest: The cost of borrowing money, usually expressed as a percentage of the principal.
  • EMI: Equated Monthly Installment is the amount of money that a borrower pays to the lender every month until the loan is fully repaid.
  • Loan Tenure: The period during which the loan is repaid.
  • Prepayment: The process of repaying the loan before the end of the loan tenure.
  • Foreclosure: The process of the lender taking possession of the pledged property due to the borrower's failure to repay the loan.
  • Loan-to-Value Ratio (LTV): The ratio of the loan amount to the value of the pledged property. A high LTV indicates a higher risk for the lender.
  • Processing Fees: The fees charged by the lender for processing the loan application.
  • Prepayment Penalty: The penalty charged by the lender if the borrower repays the loan before the end of the loan tenure.
  • Credit Score: A numeric representation of a borrower's creditworthiness based on their credit history and financial behavior.
  • Amortization Schedule: A table that shows the EMI breakup between principal and interest over the loan tenure.
  • Disbursement: The process of transferring the loan amount to the borrower's account after the loan is approved.
  • Title Search: The process of verifying the ownership and legal status of the pledged property.
  • Stamp Duty: The tax levied on the mortgage deed as per the applicable state laws.
  • Floating Interest Rate: An interest rate that varies according to market conditions.
  • Fixed Interest Rate: An interest rate that remains constant throughout the loan tenure.
  • Margin Money: The amount that the borrower has to pay upfront to avail of the loan against property.
  • Top-up Loan: An additional loan that can be availed by the borrower on top of an existing LAP.
  • Co-applicant: An additional applicant who applies for the loan against property along with the primary borrower.
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