Loan Against Property: An Overview
Are you looking for a convenient loan option to finance all your high-end expenditures for personal or business purposes? A loan against property is best suited for such situations.
LAP loan is a type of secured loan that you can opt for by keeping your property or asset as a mortgage with the lender. The lender holds it as collateral until you pay off the full loan amount over a fixed period.
LAP Loan: Benefits You Should Know About
A loan against property offers several unparalleled benefits. Here is a look at the top features that attract borrowers.
High Loan Amount
Property loans offer a high amount, depending on the market value of the asset. Usually, lenders offer an LTV (Loan-to-Value) ranging between 70% and 75% of your property’s appraised value. However, an exorbitant amount could make your repayments stressful. Therefore, it is a good idea to evaluate your repayment capability before choosing the loan amount.
Affordable Interest Rates
Since property loans are secured loans, the risk on the lender’s part is significantly reduced. Thus, most lenders offer attractive loan against property interest rates, typically ranging between 8% and 15% for salaried and self-employed borrowers. Check the eligibility criteria before sending out your loan application.
Tax Benefits
A loan against property also serves as a tax-saving instrument. One of the major reasons why many borrowers choose to go for this type of loan is because Sections 37(1) and 24(B) of the Income Tax Act allow you tax benefits on the interest paid when the amount is used for business purposes and house financing, respectively. One can claim a tax rebate of up to Rs. 2 Lakhs on the interest component for home financing.
Multipurpose Loans
You may need money over and above your savings for various reasons, like a medical emergency, wedding, business expansion, travel, higher education, house construction, home improvement, and so on. Property loans can be used for all such purposes.
No Restriction on Usage
One of the biggest benefits of a mortgage loan is that there are no restrictions on its usage. If you meet the eligibility criteria, the lender will never ask how you plan to spend or use the funds. However, since such loans involve collateral, you will have to pay off the full amount as per the lender’s terms and conditions. Failing to repay the amount before the due date may negatively affect your CIBIL or credit score, making you liable for payment defaults.
Quick Approvals
When you need money urgently, all you want is your loan application to get approved at the earliest. Approvals and disbursals of secured property loans are much faster than other types of loans.
Factors Affecting Loan against property Interest Rates
If you want to get the best deal, first know about the key factors that determine your mortgage loan interest rates.
Credit Score
A higher credit score, preferably above 725, is likely to fetch you a lower rate of interest.
Property Type & Location
LAP interest rates vary depending on whether the pledged asset is a residential, rental, or commercial property. Besides, the location and current condition of the property also play a vital role. For instance, properties in urban areas usually have higher interest rates owing to the high standard of living.
Down Payment
A larger down payment typically means a lower rate of interest because the lender sees a lower level of risk when you have more stake in the property. So if you can comfortably put 20% or more down, you may receive a lower property loan interest rate.
When opting for a loan against property, you have to be prudent. This is particularly true for first-time borrowers. Before finalizing the loan amount, make sure you have done your research and compared LAP interest rates offered by various lenders. To ensure smooth and easy repayments, you can make use of the LAP EMI calculator, which gives you faster, accurate results.
Also Read: All You Need to Know About a Housing Loan EMI Calculator
