Life throws many challenges, and sometimes you need additional funds to help you get through the tough times. Unfortunately, you cannot always rely on your regular income to get you through. You might face a medical emergency or have to pay for a child’s college tuition, and the fund requirements may be substantially more than what you have.
A loan against property (LAP) is an option that you may want to consider in such situations. This option allows borrowers who do not want to sell their property to borrow from lending institutions at attractive LAP loan interest rates.
Here are a few common questions and the responses to them.
What is a Loan Against Property (LAP)?
Property is a valuable asset that can be useful to garner funds when you need them most. An owner of real estate who urgently needs money, for instance, can use a loan against mortgage property to cover the financial crisis.
A loan against property is a loan taken against the value of the property held by the borrower.
Obtaining a loan against property can enable you to accomplish your objectives quickly. According to your needs, they offer tailored loans with minimal paperwork, low LAP loan interest rates, loan amounts up to Rs. 5 crores, and a hassle-free experience.
Can I borrow money against the house I live?
Commercial, industrial, and residential properties could all be used for a LAP. A residential property may be self-occupied or rented, such as a flat, an apartment, a single-family home, etc.
Commercial real estate includes offices, stores, malls, and godowns. You may also be eligible for a loan against mortgage property if you own a plot or land.
How can LAP proceeds be used?
A LAP is a flexible loan and can be used for both personal and professional purposes. Various expenses, from medical bills to a significant life event or a business need, may be covered by the money from a loan secured by the property.
Is collateral required for a loan against property?
To secure the loan, a borrower must pledge their property as collateral. Hence it is known as a loan against property.
What conditions must be met to obtain a loan secured by property?
The lender would evaluate the borrower’s income and capacity to repay the loan. Before approving the loan, the lender will also consider the borrower’s age, dependents, employment status, education, credit history, the market value of the property, etc.
What is a loan to value?
Loan to value is the maximum amount of loan that a borrower can obtain based on the current market value of the asset used as collateral, i.e., a real asset.
The amount borrowed divided by the property’s market value makes up this ratio. A borrower’s chances of obtaining a loan against property with particular benefits increase with a lower ratio.
Who is the legal owner of the pledged property?
When a loan is taken, the lender receives the property papers. The documents are returned once the borrower has repaid the loan amount in its entirety.
Do loans secured by property have any tax advantages?
A borrower may take advantage of many tax incentives on loans against property under Section 24(b) and Section 37(1) of the Income-tax Act. These tax deductions only apply to interest paid in equivalent monthly installments.
How is a LAP different from a home loan?
Even though both loans are secured by real estate, a home loan is obtained to purchase a home, whilst a LAP is obtained against real estate you already own.
Since both these products heavily rely on property, there are certain similarities between the two.
Home loans and LAPs both fall under the category of secured loans. If the borrower defaults, the lender may recover losses by selling the house, which is pledged as security.
Moreover, since the two products are secured debt, they both have lower interest rates than personal loans.
An extensive range of parameters, including interest rates, the loan’s term, and the ease of making payments, are taken into account during the sanctioning procedure for a LAP.
Therefore, investigate and assess each LAP loan option to see if it fully aligns with your long-term financial interests.