LAP or loan against property is a secured loan used to finance multiple purposes.
Right from funding your business-related goals to your child’s higher education, medical crises, weddings, or any other individual requirements, a LAP loan can help you meet all your financial obligations.
Various banks and financial institutions provide these kinds of loans for a fixed tenure by keeping your property as collateral.
A Loan Against Property is a financial instrument that allows you to borrow against the value of an asset you already own. It can be used to consolidate credit card debt or unlock cash from other assets such as real estate, stocks, and bonds.
Loan Against Property is a good alternative to how to get quick cash. So for investors, you can make a lot of money through this by taking a loan against the property when the value of your property has gone up but doesn’t have enough cash in your hand.
Tips to remember before taking a loan against property
When you take a loan by placing your property as collateral, it is known as a Loan Against Property (LAP). Now, this property can either be a residential as well as a commercial property. Mentioned hereunder are some things to remember before taking a loan against a property.
1. LAP loan interest rate
The interest rate on a loan against property ranges between 9% and 14% and varies from one financial institution to another. Hence, never commit to a lender before comparing the LAP loan interest rate.
Also, along with weighing the LAP loan interest rate between different banks, you must compare other kinds of loans such as interest rates on a personal loan, home loan, and many more to make a well-versed decision.
A Loan Against Property is a loan taken against an asset to help the borrower gain liquidity in their cash flow. The property that has been purchased may be used as security against the loan.
The lender may limit the amount that can be borrowed by assessing their available equity in the property. Typically larger amounts are permitted when the property has been purchased but has not yet been built.”
2. Loan Sum
The principal sum of your loan against property gets determined by a thorough evaluation of your property value. The maximum sum that you can obtain will never surpass the present value of your property.
Apart from this, most banks and financial institutions sanction only between 60% to 70% of the cost of your property.
However, you can visit your lender to get an exact estimate of the loan amount you can get by keeping your property as collateral.
3. Loan Duration
Usually, the loan duration in a loan against property gets extended up to 15 years by various banks, though the maximum loan duration possible can be as long as 30 years. Also, this duration of a LAP loan will make the EMI amount contract proportionately.
While the longer loan tenure will make the monthly installments affordable, it can also increase your overall outgo as the LAP loan interest rate gets compounded. Hence, always consider this factor before applying for a LAP loan.
4. Eligibility Criteria
The eligibility criteria of a loan against property will differ from one financial institution to another. Hence, you should always check the eligibility criteria of the bank you wish to apply for a loan against property. This way, you can eliminate room for any errors and increase your chances of loan approval and further expedite the loan processing.
5. Penalty and processing charges
Like any other loan, there are processing charges on a loan against property that ranges between 0.50 % and 4%. Apart from this, many banks charge a stamp duty charge as per state laws ranging between 0.25%and 2 % and penalties on delayed EMIs, cheque bounce, and many more. Hence, you must always remain informed of these charges before applying for a loan against property.
Now that you are aware of the factors to keep in mind before applying for a loan against property, you can readily choose the right lender for your loan needs and put your commercial or residential property to good use.
A loan against property is one of the financiers that provide funds and services to individuals.
A loan against property is one of the financial tools that help to cater to the needs of individuals who need cash but with no collateral options available to them. They are provided with a cash advance which helps in acquiring a wide array of paramount loan assistance which may be generally required by them.