Loan Against Property (LAP) is one of the easiest ways to access credit. It is a secured loan where the property, usually a home or a piece of real estate, as collateral.
But do you need to go for LAP? Is taking out a LAP loan right for you?
Let’s look at its advantages and drawbacks that should influence your decision to take out a loan on property in India.
Who Should Consider Taking A Loan Against Property?
If you have valuable assets that aren’t earning any income and can benefit your business or lifestyle, taking out a loan against your property may be worthwhile.
For example, if you’re facing tax difficulties or your main capital is tied up in immovable assets, taking out a loan for investing or personal reasons might help put some money back into your pocket.
The common scenarios where an individual needs emergency expenses are medical emergency or expanding the ongoing business. However, before applying for a LAP loan, take a quotation from banks or lenders to compare the property loan interest rate.
5 Primary Benefits Of Taking A Loan Against Property
Taking a loan on the property has many benefits:
1. Interest Rates Are Nominal On Loan Against Property
Loans against property are one of those facilities which could come in handy when you need to borrow some money on an urgent basis or if you want to invest in something and aren’t able to find your finances.
It is where someone lends you money by taking over your assets like land, building, apartment, flats, etc. The property loan interest rate is nominal compared to personal loans.
2. LAP Loan Gives Big Loan Amount
Banks, NBFCs, and other finance companies offer a large sum of money after calculating the current market value of your property. You will get 50 to 70% of the loan amount for the property you put as collateral.
The higher your property market value, the big the loan amount you will get on your property.
3. LAP Loans Have Large Tenure
Most LAP loans offer tenure up to 20 years or even more. This option is handy to pay off your LAP loan over longer periods, which is beneficial if you cannot make large lump sum payments.
Also, by paying off your home loan over longer periods, you can enjoy tax benefits on your interest payments for that year.
The repayment schedule for most LAP loans is flexible, so you can choose how much and when you want to pay each month. For example, suppose your monthly income has dropped due to illness or loss of employment. In that situation, you can ask for an adjustment in your repayment schedule with most banks and financial institutions offering these loans.
4. LAP Loan Can Also Approve With a Low Credit Score
If you need money and have collateral, such as a home or commercial building, try applying for a LAP Loan. It’s easier to get a LAP Loan if you have a low credit score or limited credit history.
Many banks or other lenders do their evaluation and provide loans on property without concerning your credit score.
5. Eligibility Criteria For LAP Is Flexible
A Loan Against Property (LAP) is a secured loan that provides financing for expanding a current business or other liabilities. Banks, financial institutions, and NBFCs offer loans against properties on some flexible terms and conditions.
The amount of money you can get from LAP ranges from 50% to 70% of your home’s market value. The applicant should meet all statutory requirements such as legitimate property documents, occupancy certificate, identity, and address proof to be eligible for LAP.
Drawbacks Of Taking Loan Against Property
- Risky when you have only one property under your name
- The lender holds all the major rights on your mortgaged property
- The lender acquires the right to sell your property if you fail to pay the due amount
- A lender has the right to claim pending dues from the borrower even if the lender sold the mortgaged property
Loan Against Property is a popular option to access credit at short notice. Lenders find it safer to offer credit where a home or piece of land is the collateral. Because of such reasons, more and more people apply for LAP. Getting money out of your home can help you if you’re looking to start a business or need some extra cash for an emergency. Plus, with interest rates on these loans averaging between 8 to 11%, it is a preferable option over a personal loan with its high-interest rate.