A loan against property (LAP) is a type of secured loan availed by a borrower by pledging his/her property to the lender. In general, this credit option is taken to meet large expenses like business expansions, home renovations, weddings, children’s education, or investments. Being a secured credit option, lending Loan against property is quite safe for lenders as they can recover the loan amount by selling the borrower’s pledged asset if the latter fails to repay the loan.
What are the advantages of a loan against property?
Given the ease of availing a property loan and its various merits, one can be sure of attaining key goals like education, travel, marriage, or business development while conserving long-term financial stability. Mentioned below are the common advantages of a loan against property:
Substantial amount
One of the prime advantages of a property loan is the ample loan amount received by the individual. In a loan against property, the amount of the loan is determined as per the market value of the property. This amount is computed using the loan-to-value (LTV) ratio. Generally, lenders provide borrowers up to 70% to 80% of the market value of a property for the entire loan tenor.
Competitive interest rates
Since the risk involved in a loan against property is quite lower than unsecured credits like personal loan, business loan, etc., lenders charge reasonable interest rates compared to other types of mortgage loans. Usually, the rate of interest for a loan against property ranges between 8% and 10% per annum or even goes up to 20% depending on the terms and conditions of the lending institution. This low-interest rate also reduces the burden of paying a high amount of EMIs every month.
Flexible repayment tenure
Loan against property comes with a flexible and convenient repayment tenor, so one can pay his/her EMIs on time effortlessly. Unlike unsecured credit options like personal loans, business loans, etc. where there is a short repayment period between 5 years and 8 years, the repayment tenor for secured loans like Loan Against Property can go up to an extended period of 15 years. This longer time window does not strain the borrower, rather it lowers their EMI payments as well as the interest rates.
Minimal foreclosure charges
Minimal to zero foreclosure charges are one of the principal advantages of a loan against property. Foreclosure refers to the closing of a loan before the ending of its repayment tenor. Most of the lenders levy foreclosure charges of 2% to 4% of the unsettled principal amount alongside the applicable taxes. However, it varies from one lender to another. While availing Loan Against Property, an individual should gather detailed information from the lender about the loan processing, documentation, and hidden fees.
Fast approval
One of the top benefits of a loan against property is its quick verification and minimal documentation process that ensures quick approval. Furthermore, the online Property loan application process for a loan against a property makes it quite time-saving and convenient. One might expect to get the loan amount approved on the same day he/she has applied for the loan request.
Pre-approved offers
Often, lending institutions provide pre-approved credit offers on loans to their trusted and long-time customers. These offers are available on both secured loans like housing loans, loan against property, etc. and also on unsecured loans such as personal loans, business loans, etc. Doing so helps in expediting the lending process. Customers eligible to get pre-approved facilities on loans can check their offers online by entering their names and contact details.
However, to avail these advantages, one must fulfil the mortgage loan eligibility criteria and documentation process.
What are the types of loan against property?
Mentioned below are the common types of property loans that can be availed to fulfil various financial and personal needs:
- Loan Against Property for residential or commercial property
- Loan Against Property for Wedding purposes
- Chartered accountant loans
- Loan Against Property for debt consolidation
- Loan Against Property Balance transfer
- Loan Against Property for house renovation
- Loan Against Property for education
- Loans for doctors
How to apply for a loan against property?
Following is the step-by-step procedure to apply for a loan against property online:
Step 1: Visit the official website of a preferred lender
Step 2: Navigate to the ‘Loans’ section and click on ‘Loan against property’
Step 3: After this, click on ‘Online Loan Against Property form’
Step 4: The borrowers should fill out the Loan Against Property application form with the personal details and property details correctly
Step 5: Choose the preferred loan amount
Step 6: After this, borrowers should cross-check every data and click on ‘Submit’
Upon completion, the application for a loan against property will be submitted successfully.
In a nutshell, loans against property have gained immense popularity owing to their secured nature and exceptional advantages. However, before availing this loan, borrowers need to visit the websites of multiple lenders to compare their loan offers and choose the best one for themselves.
