Banks prefer to dole out secured loans, which means that some collateral needs to be offered in lieu of the loan amount. In most cases, many borrowers seek loans against property (LAP) though in other cases borrowers may seek loans against gold assets, shares or mutual fund investments.
One can seek LAP from any borrower be it a bank or any lending organization. Also, borrowers may offer their commercial or residential properties as collateral to avail of a certain amount of loan from lenders. The limit of the amount one may borrow, however, depends on a lot of factors though both salaried and self-employed people may apply for this type of loan.
Also, the interest rate on LAP is lower than that on a home loan considering how the former is secured. Banks approve these loans faster than other loan applications that may involve zero collateral offers. Unlike home loan offers that must be used to build or buy homes only, you can use this type of loan for any purpose, be it personal or commercial.
The benefits of seeking a loan against property include:
Paying for a new property
You have an extra property that you can use to avail of a new loan like buying a new home or an added commercial space. Also, you can use the extra money to fund your other activities or businesses, thus, allowing you to use the loan amount for multiple purposes. You can also use the money to refurbish your existing home or expand your business operations.
Prolonged loan tenure
The interest rates have increased, thus, resulting in higher equated monthly instalments (EMIs). Fret not, as LAP allows you access to a flexible and longer repayment tenure ranging between 15 and 20 years. You may opt for a longer loan tenure, thus, allowing you to repay your loan in smaller instalments at considerable ease. If you have access to a windfall amount from your bonus, appraisals or business, you may prepay the loan at no added charges since prepayment of LAP involves no prepayment charges.
Paying for larger expenses
How many times do we see that many families tend to go overboard with expenses on their marriage or have to meet expenses of their business overheads? Also, higher education may mandate a high loan amount, which you may fund by seeking a LAP. The idea is to explain how you can use the amount gained from LAP to meet some other big-ticket expenses or your business working capital requirements too.
Obtaining a large amount at once
Think of a situation when you may need a large amount of money at once. Instead of borrowing from friends and relatives, you may take a loan against your property.
Most of the time, banks offer loans equivalent to 75-80 per cent of the property’s value. You may ask for a larger amount in lieu of keeping your valuable property as collateral for the loan amount. The borrower’s eligibility also matters. However, seeking a LAP instead of a personal loan would not only avail you of a larger loan amount but also benefit you from the lower interest rates.