Loan Against Property, also abbreviated as LAP, refers to a secured type of loan that lets you pledge your property to get a loan in exchange. Amidst the pool of various credit-availing options for loan seekers, users can opt for any mode that suits their needs and preferences in the best possible manner. However, getting a loan can be time-consuming and a lengthy procedure as one needs to follow various steps right from documentation, KYC and other formalities.
If you’re seeking funding and owning property, opting for a Loan Against Property (LAP) can be an effective choice, offering substantial loan amounts at favourable rates. Read on to learn more about the meaning of LAP, how it works, its advantages and why one should get it.
Meaning and Purpose of Loan Against Property
Loan Against Property is nothing but a secured loan that can be availed by both salaried people and businesses. The sanctioning of a loan happens as soon as you mortgage your property, which can either be residential or commercial.
The credit amount is equivalent to the property’s current market value and is approved by the respective bank. Being a loan applicant, you can place your property on a mortgage, which can be self-occupied or another owned piece of land. However, the property title should be clear.
LAP can serve a variety of purposes for the user, some of the significant ones consist of:
- To broaden your business.
- To procure funds for medical contingency.
- To procure funds for your child’s wedding event or other related festivities.
- To procure funds for your kid’s education.
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Benefits of Loan Against Property
Mentioned below are a few advantages that come along with getting a Loan Against Property:
- Broad Repayment Duration:
Loan Against Property or LAP comes with a long repayment tenure lasting up to 15 years.
- Less Interest Rates:
When compared to other unsecured products like Personal Loans, wherein the interest rate is generally on the higher side, LAP offers low interest rates and charges.
- Low EMIs:
The greater the duration, the lesser the EMI. Hence, this reduces the loan burden since the EMI tends to get reduced as the LAP tenure gets longer.
- Can be Availed With Ease:
Opting for a LAP is easy as it involves a simple procedure. Since it is a secured loan, banks are generally more willing to offer credit. You can mortgage your property with a well-established and reputable bank to secure funds for your personal or business needs.
Hence, a Loan Against Property can prove to be one of the most lucrative and efficient ways to obtain financial assistance for catering to any of your requirements. It can be obtained simply by getting in touch with your preferred bank or other financial institution; it also comes with many remarkable features that make it one of the most attractive modes of obtaining funds.
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Who Should Consider a Loan Against Property?
If the loan seeker meets the eligibility criteria, a Loan Against Property (LAP) can be a suitable option. Banks offer LAPs at competitive interest rates, making it an attractive choice for high-net-worth individuals or professionals, such as doctors, lawyers, and others, who meet the required income and financial profile.
If you fall into this category, applying for a LAP can help fund both personal and business needs with ease and convenience.
Risks and Considerations
However, getting a loan against property does contain its pros and cons. It becomes important for you to know some of the risks and points to be careful about while opting for an LAP. The considerations include:
- Long Sanctioning Time for a Loan:
Sometimes the Loan Against Property (LAP) approval process takes longer than anticipated. This is because to guarantee the security of the loan, banks perform extensive background checks and credential verification.
Even though these procedures are required for the loan to be approved, applicants may find the lengthy processing period annoying at times.
- Property Value:
When assessing the worth of a property, different banks provide different valuations, which can be a drawback. Price discrepancies could occur when appraisal techniques are different. Nonetheless, it is generally assumed that banks will lend about 70% of the property’s overall worth.
- Price Instability:
Because of the economy’s dynamic nature, the cost of the property may fluctuate, which can worry the investor because the real amount provided might be less than what he had expected.
Final Thoughts
On a concluding note, LAP is a robust financial tool that facilitates the procurement of funding for various personal and business needs. However, the borrowers should analyse their repayment capacity and know about the risks that come with pledging assets. If used with diligence and discipline, a loan against property can be useful for handling various monetary needs and challenges.
Looking to maximise your financial potential? With a Loan Against Property, you can unlock funding for your goals. Pair this opportunity with an investment in Rustomjee Properties and secure a premium lifestyle and valuable asset. Visit our website to explore our exclusive projects today.
FAQs
- What are the eligibility criteria for LAP?
For any residential or commercial property in India, the applicant’s minimum age should be 18 years and the maximum age can be 70 years. Any salaried or self-employed individual can make an application. The credit score should be 750 or more than that. Lastly, the net annual income (minimum) should be Rs.1.5 lakh p.a.
- What are the documents needed to get LAP?
To get LAP, one requires various documents such as a PAN Card, Voter ID, Driving License, Passport, Aadhar Card, Electricity Bill, etc. Also, documents showing proof of income like the latest Income Tax Return Certificate, and Salary Slips are required.
- How is the loan amount determined?
The LAP amount can be determined by assessing the property’s market value that you wish to mortgage. Generally, the lenders provide around 50 to 80% of the property’s market value as a loan. The lender’s valuers assess the property to determine its current market value.
- What is the LAP Repayment Procedure?
Normally, the process of repaying an LAP consists of making timely Equated Monthly Instalments or EMIs; these EMIs are a combination of principal amount and interest, that eventually decreases the loan amount balance over some time.
