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Loan Against Property

Things you should know about loan against property

You have a lot on your might when it comes to sending your children to college abroad or financing your daughter’s wedding. However, the first question that arises in our mind is, ‘how will I arrange the money?’ There are several ways you could arrange for the amount required, and one of those ways is taking a loan against property.

What is a loan against property?

As implied by the name, a loan against property (LAP) is a loan granted or disbursed against the mortgage of property. The loan is given as a particular percentage of the market value of the property, generally around 40-60%. Loan against property comes under the secured loan category where the borrower uses his property as security to give a guarantee.

When can a loan against property be taken?
You can take a loan against property for growing your business, getting your children married, sending your children aboard for higher education, funding medical treatments and funding an expensive vacation. Basically, this type of loan will fulfil your financial needs when necessary.

Who can apply for a LAP?

Self-employed people can apply for an LAP when they require a significant amount of money for setting up a new business. In such cases, they can apply for a loan without renting out or selling their property.

Their property will be kept on mortgage and the loan amount will vary from 40 percent to 70 percent of the property’s market value. Loan against property is the most secure of all the loans with a relatively lower lending rate.

Also, the expenditures are excluded. However, because of the structure of lending by the banks, the LAP is a bit higher than the home loans.

Requisites to apply for a loan against property:

• The person who is applying for the LAP should have property in his/her name (Owner of property will be co-applicant or
guarantor of loan against property

• LAP can be applied to a property that is collateral and the repayment term can be as long as five to fifteen years.

Advantages of loan against property: Lap has a lot of advantages. For instance, interest rates are far better than other

forms of loans, such as personal loans. Also, the property remains in the name of the owner and the asset can be laid to
a more productive use. The advantages of LAP are as follows.

• The value of the property owned is created for a productive use.

• The processing of LAP is quicker than a home loan, as the property already exists.

• LAP lets the partial pre-closure without any penalties. This is an advantage as the overall interest burden or the tenure of the loan can be decreased by paying small additional amount.

• An opportunity to refinance can be used to raise the loan amount for a businessman who is on a continuous expansion binge. They can utilize the same property to constantly build the business later on as well.

• In an LAP, the property continues to be in the name of the borrower. In case the borrower is not able to pay the loan, he/she can sell the property and then settle the loan. Additionally, this will also leave superfluous cash for the borrower to restart his/her financial life.

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