By pledging your home as collateral, a loan against property will provide you with immediate cash. It’s a common option because of the long repayment period and low interest rate.
A loan against property, as the name implies, is a secured loan obtained by mortgaging a self-owned property (residential or commercial) with the lender. Read on to learn more about this loan, which has become a common financing choice for many because of the various benefits it provides. Check the loan against property emi calculator and make a calculated decision.
You will be able to borrow up to 60% of the market value of the underlying property, depending on the lender’s policies. You can also take advantage of the relatively long repayment period (up to 15 years) by making sure that the monthly repayment instalment is manageable.
The lender does not impose any restrictions on the use of the money lent. It can be used for a range of items, from paying for an upcoming wedding to funding business and growth plans (i.e. taking out a business loan), meeting healthcare costs, and even buying a property or asset that would not otherwise qualify for a loan on its own.
LAP is a very versatile product by default for the following reasons.
- By way of longer loan tenures and lower debt repayment costs relative to short-term loans, LAP assists in securing greater loan amounts appropriate for major business expenditures such as capital expenditure.
- Since it is a secured loan, LAP normally has lower interest rates than unsecured loans like BIL.
- Since it is a fixed-term loan, it does not need regular renewal, including Cash Credit and Overdraft (CC & OD) caps.
For securing a loan against property, there are primarily two requirements:
- A defined income stream with a three- to five-year vintage.
- Property that can be used as collateral protection is available.
The loan is available to salaried workers as well as self-employed professionals and business owners. In contrast to other forms of loans, a loan against property has fewer documentation requirements and can be disbursed easily.
LAP’s main characteristics
- Unlike unsecured loans, where the debt amount is determined by your current income, the loan amount for a loan against property is determined by the current property value as well as your income. Furthermore, your age and credit history would have an effect on the loan amount and conditions.
- You must also request ownership documents as well as a property valuation report, in addition to the application form and proofs of identification, address, and income. Remember to provide accurate details so the lender can double-check anything you say.
- The lender will process your loan application after verifying all of your details and ensuring that you will be able to fulfil your repayment obligations. A field visit will be made to examine the property that will be used as collateral.
- There may be a processing fee, mortgage stamp tax, and other costs in addition to the interest rate on loan, depending on the lender.
- The loan is disbursed after all formalities have been completed and the loan has been sanctioned. The loan may be disbursed in a single or 2-3 instalments, depending on the loan amount, which may or may not be extended over a period of time.
While the loan will provide you with direct access to the funds you need, you must ensure that you are able to make regular payments. As a result, look for a lender that allows you to tailor the loan to suit your income pattern, meaning that you can repay the loan on time and without stress.