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Tata Capital > Blog > Loan on Property > Micro LAP Loan: Meaning, Features, Eligibility & Benefits

Loan on Property

Micro LAP Loan: Meaning, Features, Eligibility & Benefits

Micro LAP Loan: Meaning, Features, Eligibility & Benefits

A salaried employee may have limited savings to fund their marriage. An individual may be a small business owner who wants to send his daughter abroad for higher studies. Alternatively, an individual may have a business plan to execute for which she needs an immediate influx of funds. In such cases, a micro loan against property (LAP) can prove to be immensely helpful. 

Loans can be secured or unsecured. While unsecured loans come without collateral, people prefer the former because of their ease of access and lower interest rates. Micro LAP belongs to the secured category and can help fill in the immediate need for cash that may arrive at an individual’s door. 

This article discusses what is micro LAP and everything an individual needs to know in order to help them ascertain if they should apply for one. 

Micro LAP Meaning: What is a Micro Loan Against Property?

A micro LAP refers to a secured loan wherein the borrower keeps their commercial or residential property as collateral. These loans are a terrific way to tackle the monetary crisis period or to enable them to do something they desire, such as starting a new business or sending their daughter to study abroad. These loans can even be used for funding other needs, such as a family vacation, marriage, or anything else. 

Key Features of Micro Loan Against Property

Following are some of the micro loan against property features to be kept in mind while applying for one:

Easy to apply

An individual can apply for a micro LAP online not only against a constructed property (commercial or residential) but also against a plot of land. It means that even if they do not have income tax returns (ITR) and other income proofs, they are eligible to raise a loan, but they may have to explain why they do not possess the requisite documents. 

Flexible

The borrower can avail of LAP conveniently for any amount in a specified range with a comfortable repayment term to suit their financial position and ensure they do not suffer because of an unforeseen crunch.

Modifiable to suit every job profile

A micro LAP can be needed by anyone, from a salaried employee to a CA or an MBA. So, these are highly flexible and can be modified to cater to different job profiles with ease. The primary thought behind a loan against property is that anyone with property should be eligible for a loan against it, and the loan terms can be curated to align with their repayment abilities. 

Affordable interest rates

Micro LAPs are secured loans backed by property, which gives a sense of security to the lender. It also allows them to forward the sum to the borrower at a reasonable interest rate, which they consider affordable. It is imperative to understand that the micro LAPinterest rate would ultimately depend on several factors, such as the credit score of the borrower, property type, and loan amount. 

Significant loan amount

If the individual owns a high-value property, they can get a sizeable loan against it. It is because most lenders are happy to forward an amount equal to up to 70% of the collateral’s current market value.

Benefits of Micro LAP Loan

Following are some of the key LAP benefits: 

1. The individual can withdraw the entire amount or avail of it as a line of credit.
2. Lenders accept both residential and commercial properties as collateral.
3. In most cases, there are no pre-payment charges involved, with a limit on maximum pre-payment available during a financial year.
4. Quick disbursal process that can cater to your immediate monetary needs.
5. Minimum documentation needs with effortless loan processing.

Eligibility: Who Can Apply for Micro LAP?

There is no bar on who should apply for a micro LAP. It means anyone in need of funds and having property can apply for a micro loan against property to manage their upcoming monetary needs.

Top Uses & Reasons to Choose Micro LAP

A micro LAP loan is an excellent option for those who need a loan and own a property that can be used as collateral. The use cases for which you could apply for a loan against property are as follows: 

1. To meet the working capital needs of the business.
2. To expand the business.
3. To fund their child’s education expenditure.
4. To meet an immediate monetary crisis, such as medical expenses or repairs.
5. To meet the expenses of their child’s wedding.

Micro LAP vs. Standard LAP: Key Differences

Micro LAP and Standard LAP are both loans taken against property, but they suit different borrower needs. The main differences are in loan size, eligibility, paperwork, speed, and flexibility, as can be seen below:

AspectStandard LAPMicro LAP
Loan sizeLarge-ticket loans meant for substantial funding needsSmall-value loans meant for short-term or limited needs
Who it suitsEstablished businesses and larger firmsSmall traders, shop owners, and micro-entrepreneurs
Paperwork requiredDetailed financial and legal documentsBasic and simplified documentation
Approval timeTakes longer due to checks and verificationFaster approval and disbursal
Repayment optionsModerate flexibility in tenure and structureMore flexible repayment options
PurposeExpansion, large investments, or refinancingWorking capital and day-to-day business needs

Micro LAP Loan Process: How to Apply & Documents Required

Applying for a Micro LAP against property is a simple and structured process, which is designed to allow quick access to funds:

Step 1:
The applicant must fill out an online application form with basic personal, business, and property details. 

Step 2:
After selecting the required loan amount and preferred repayment period, the applicant needs to upload the necessary documents.

Step 3:
Submit the application for review.

The documents required for a Micro LAP generally include the following:

  • Completed application form
  • Proof of identity and address
  • Property ownership documents
  • Recent bank statement
  • Income tax returns
  • Business financial records
  • Credit score report

Additional documents may be required depending on the applicant’s profile or the nature of the property.

Interest Rates, Tenure & Charges for Micro LAP in India

Micro Loan Against Property is designed for small borrowers who require quick and secure funding. Its interest rates, repayment period, and charges are structured in the following way:

Interest Rates
Interest rates for Micro LAP in India generally fall between unsecured business loans and regular LAPs. Rates depend on factors such as credit score, property value, income stability, and lender type. They are usually moderately priced compared to personal loans.

Tenure
The repayment period is flexible but shorter than standard LAPs. Most lenders offer tenures ranging from 1 to 10 years, allowing borrowers to manage EMIs comfortably.

Charges
Common charges include processing fees, legal and valuation costs, and possible prepayment or foreclosure fees. These are different for different lenders and should be reviewed carefully before applying.

Also, read – Guide to Loan Against Property (LAP)


Common Myths & Facts About Micro Loan Against Property

Micro Loans Against Property are often misunderstood, which prevents many small business owners from using them effectively. Some common myths and facts are explained below:

Myth 1: Micro Loan Against Property is Unsecured
Fact: These loans are actually secured by residential or commercial property, which helps lower risk for lenders.

Myth 2: Only Large Businesses Are Eligible
Fact: Small shop owners, self-employed individuals, and micro-entrepreneurs can also apply.

Myth 3: Interest Rates Are Very High
Fact: Rates are generally lower than unsecured business or personal loans.

Myth 4: The Application Process Is Complicated
Fact: Micro LAPs usually require limited paperwork and have faster approvals.

Also, read –  How Is Loan Against Property Processed?



Tips for Getting Your Micro LAP Approved Faster

Getting a Micro LAP approved quickly depends on how well prepared you are before applying. A few smart steps are mentioned below:

• Keep property documents updated and clearly in your name.
• Maintain a stable income or business cash flow record.
• Choose lenders experienced with micro and small borrowers.
• Submit complete KYC and basic financial documents upfront.
• Avoid existing loan defaults and maintain a decent credit score.

Conclusion

When individuals need funds, it is best to avail of a loan instead of using their hard-earned savings. Having a real estate investment can be your best bet, as it allows you to apply for a micro LAP online with optimum ease. Some lenders also allow borrowers to shift loans taken from elsewhere to convert them into a micro LAP online and reap the benefits of it. At Tata Capital, we offer loans to cover all the needs of an individual. Be it a personal loan, home loan, business loan, or a loan against property, we have a seamless approach combined with minimal documentation, which makes the application process clutter-free for the applicant.  If you want to understand more about your micro LAP loan before applying for one, check out our loan against property EMI calculator for more details.

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FAQs

What is a micro LAP loan?

 

A micro LAP loan is a small loan taken against property, designed for quick funding and smaller financial needs.

Who is eligible for a micro loan against property in India?

 

Small business owners, self-employed individuals, and salaried borrowers owning property with stable income are generally eligible.

How is a micro LAP different from a regular LAP?

 

Micro LAP offers smaller loan amounts, faster processing, simpler paperwork, and suits micro businesses unlike regular LAPs.

What documents are required for a micro LAP loan?

 

The documents required for a Micro LAP loan generally include a completed application form, proof of identity and address, property ownership documents, recent bank statements, income tax returns, business financial records, and a credit score report.

What is the typical tenure and interest rate for a micro LAP in India?

 

Tenure usually ranges from 3 to 10 years, with interest rates slightly higher than standard LAPs.

Can I use a micro loan against property for personal or business needs?

 

Yes, micro LAP funds can be used for both personal expenses and business-related financial requirements.

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