One sort of secured loan in India is a loan against property or LAP loan. A secured loan is one in which the borrower receives funds from a lender in return for security. As the name implies, a loan of this kind is secured by real estate. That means real estate serves as the collateral in exchange for the loan proceeds. The borrower must pledge their property as collateral for the loan tenor.
The lender retains the original paperwork and title of the borrower’s property until the borrower fully repays the loan. The lender has the power to sell the borrower’s assets to recoup any unpaid loans in the event of default or non-payment. Given that it is a secured loan, a loan against property offered by lenders to borrowers has various benefits. There is a list of advantages that might help you decide if taking out this loan is the best option for your needs and budget.
A loan against property has several benefits. Here are the 6 reasons to apply for a loan against property:
High loan sanction amount-
The high loan sanction amount you receive is one of the main advantages of a LAP loan. The lenders base the loan amount on the asset’s fair market value when making a loan against a piece of property. They accomplish this by using a ratio known as the loan-to-value ratio. For the duration of the loan, lenders provide borrowers with up to 70% to 80% of the fair market value of a property.
Competitive interest rates-
A LAP loan against property is a secured loan. Thus, the lender is completely confident that they will have a backup in the event of any repayment failures. The property acts as great collateral. Because of this, lenders charge interest rates that are lower than those for other mortgages or secured loans. Each lender sets their interest rate for a LAP loan. Depending on the lender, it starts out at 8% to 10% annually but can reach as high as 20%. Apply for loan against property with the lowest interest rates. This low-interest rate ensures that you gain profit from this credit line and lessens the burden of making large EMI payments each month.
Flexible repayment tenor-
You may easily and promptly pay your EMIs with a loan against property because it provides a flexible and easy payback period. Unsecured loans have short repayment periods of between 5 and 7 years. But, the repayment period for this secured loan might even last up to 15 years. The extended payback period relieves the borrower’s stress, lowers their EMI payments, and decreases interest rates. This provides adequate time to plan your finances and set aside the monthly EMI for your loan repayment.
Diverse property types eligible as collateral-
Apply for loan against property if you have any kind of property. For a loan against property, you can utilise various assets as collateral. Lenders typically consider residential and commercial assets while approving this loan. Lenders like Bajaj Finserv frequently accept the pledging of commercial and industrial properties as well. The lender will still take it into account if the property is owned outright, rented out, or vacant. However, the pledged assets must be free from liens and legal problems and have clear ownership. Lenders also accept co-owned properties as collateral for a LAP loan. The rules for co-ownership relations differ from lender to lender.
Learn how to get loan against property if you don’t know it yet. You don’t want to miss the feature like quick approval. This is what you want when you are facing a financial emergency. The application and verification process for this loan is quicker than other loan types. This is one of its finest benefits. Unsecured loans lack collateral, making them insecure in the eyes of the lender. So, the screening process and eligibility requirements are more stringent, and lenders thoroughly examine the borrower’s repayment capacity. Also, applying for a loan against a property online is incredibly convenient and time-saving. Just search for how to get loan against property, and the step-by-step process will be in front of you. You can anticipate receiving the loan money the same day it is granted.
Minimal to nil foreclosure charges-
One of the main advantages of a loan against property is that there are little to no foreclosure fees. A foreclosure occurs when a debt is repaid early or closed before the agreed-upon period of time. Most lenders impose the necessary taxes in addition to a foreclosure fee ranging from 2% to 4% of the outstanding principal amount. Other lenders, however, don’t even charge this sum. Prefer to obtain loans from lenders who disclose all fees due during the loan processing and specify such fees in the loan documents. Verify that there are no unstated costs. However, the pledged assets must be free from liens and legal problems and have clear ownership. Lenders also accept co-owned properties as collateral for a LAP loan. The rules for co-ownership relations differ from lender to lender.
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