A loan against property, also called LAP, is loan proceeds sanctioned against your property, which acts as collateral or security. Loan proceeds are determined by lenders based on the property’s market value and usually fall around 70 percent of the property’s value. It falls under the secured credit option category and thus serves various benefits and can be availed simply by both businesses and individuals to address crucial life goals like marriage, higher education, home construction, business expansion, and so on. Loan against property comes with various benefits that you must be aware of –
Loan against property benefits
A loan against property refers to a mortgage loan offered by lenders, NBFCs, or HFCs on your commercial or residential property. There are various advantages of availing of a loan against property that can assist you in meeting your financial requirements. A LAP can be of good help for financing your personal and professional life goals. From dream weddings, higher education, and vacation trips abroad to meet your business financial goals like new inventory or equipment funding, expansion and big-ticket working capital, a LAP can be a prudent choice to opt for.
Listed here are a few benefits of availing loan against property or LAP –
LAP interest rates at lower than other credit options, especially unsecured loan options
One of the significant benefits is low Loan Against Property Interest Rates. As loan against property by nature is secured, hence lenders offer such loans at lower rates as the credit risk involved here is negligible. A lower rate of interest converts to lower loan EMIs and hence is pocket friendly.
Continued property usage
The best portion about mortgaging your residential or commercial property for a loan is you do not lose the property ownership even after you put up your property as security for a loan against the property. You still can continue using the property mortgaged as a loan. You can mortgage distinct kinds of properties like your self-occupied or rented-out property that can either be residential or commercial. You can also mortgage commercial space like shops, office buildings, complexes, malls, and others as security for a loan against property.
Disbursement of partial funds
A LAP endows you with the benefit of partial loan disbursement, wherein you avail disbursement of a part of loan proceeds and keep the rest of the amount for a later phase. Partial disbursement of funds is generally advantageous when you avail of a loan for the construction purpose or for long-term working capital requirement, wherein the expenditure is incurred over a few years. You can avail of disbursement of your sanctioned loan in several tranches according to your need. The best part is you repay EMI or interest just on the disbursed amount.
High loan repayment tenure
Unlike unsecured credit options, you can avail a higher repayment tenure while opting for LAP. It makes LAP one of the lucrative options as low rates, and higher repayment tenures are what many borrowers look for. The option to repay in smaller EMIs is the best benefit of availing of LAP.
Higher loan proceeds
LAP is a credit option that assists you in managing your expenditures that are big-ticket in nature. Such expenditures may be personal or professional. As it is a secured credit option, you usually avail the fund of up to 75 to 100 percent of the property’s market value. As it is a collateral or security-based credit option, it is available at lower rates and higher repayment tenures, which adds to your eligibility and assists you in availing higher loan proceeds.
As per Section 31 of the IT Act, you can get benefits on the interest component of your loan against property.
As per Section 24b of the IT Act, you can avail of a tax benefit of a maximum amount of Rs 2 lakh on your income tax if you have availed LAP to build your home.
Flexible loan proceeds
Loan proceeds that you can avail of through LAP are based on the property’s market value can go up to Rs 5 crores. This is a hassle-free way of availing yourself of a higher amount for your personal or professional requirements.
It may be available without income proof.
A Loan Against Property Without Income Proof may be available by a few lenders as it is a secured loan. The security that you provide is your residential or commercial property. Owing to such security, lenders do not check your income or credit profile much as they are assured that in case of any defaults on a loan repayment on your end, they may sell off the collateral to meet the principal and interest repayments. Thus, once you avail of the loan against the property option, ensure to always repay the dues by the due date. This is because, in the case of any missed repayments, your mortgaged property may be in danger.
Competitive rate of interest
As a loan against property by nature is secured, the rate of interest is comparatively lower, leading to reduced EMIs and overall financial burden.
Lower repayment tenure
Loans against property or LAP come with flexible tenures that can go as high as 15 years as compared to a personal loan, which usually may go up to five to seven years. It lowers the financial pressure upon you.
Distinct property options and optimal property use
To avail of LAP, you can use different kinds of properties such as commercial, self-occupied homes, residential properties and even a piece of land. Such flexibility not just makes availing of loans simpler but even assists you in using property in an efficient manner. Also, borrowers continue to own & use the property while using the funds against it.
The easy loan approval procedure
Given the security availability, a LAP is easy to avail of as compared to any other unsecured loan option. Documentation requirement is minimal, with few lenders offering doorstep facilities even.
Flexible usage of the loan amount
Loan proceeds availed via LAP are best for all monetary requirements like marriage, home renovation, home construction, higher studies, medical expenditures, and others.
Zero pre-closure fees
Pre-payment towards LAP is usually not penalized or charged by the lender. It makes closing your loan against property hassle-free and a simpler process.